How2Exit Episode 58: Reg Zeller - Founder and CEO of CaneKast.

Ronald Skelton  0:06  
Hello and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling.

Hello, and welcome to the how to exit Podcast. I'm Ron Skelton, your host today I'm here with Reg Zeller. Reg is the founder and CEO of CaneKast a company revolutionising the foundry industry across the United States. Welcome on the show, Reg. Man, thank you for being here.

Reg Zeller  0:46  
Hey, thanks for having me, Ron. I really appreciate it.

Ronald Skelton  0:48  
I was telling you earlier, I like to joke around and say, Man, you were born and some stuff happened and ended up on the show. You know, could you fill in the gap on how you ended up on merger and acquisitions podcast? 

Reg Zeller  0:59  
Sure. I was. I always joke about this because where I grew up, literally farmers, beer, truck drivers, electricians, etc. My dad went to college, pretty much the only one in his family. My mom didn't no one else until my cousin's literally went there. So I walked into the easy way to sell us, I walked into the guidance office and talk to people about what I should go do in my life. So we like math like solve problems, you should go to engineering school. Fast forward that 17 years after corporate of going through numerous varieties of engineering, marketing, product management, M&A in general management type roles, I decided that was really terrible advice. And I hated corporate America and doing that stuff. So I ran into a, a bad boss, and had done manufacturing really, since 2002. Pretty much when I graduated, it was for different fortune 500, companies loved manufacturing. And I always make the joke, if I could drop it on my foot and it hurts, then I enjoy those types of businesses. I'm not a software guy by any means. And so just had the decision one day of I'm out, I want nothing to do with this. No more PowerPoints, no more fancy suits, I just want to go jump in and make something here locally. And so from there, I ended up with the, the worst thing ever didn't know what ETA and all the current terms were had no idea how to buy a business, didn't really even know how to spell SBA much less what it meant. So went out and found a business randomly first business that I ever, ever actually walked inside of it was a foundry decided to buy that after some due diligence on my part, because I had that corporate background in M&A kind of understood it, the more I learned it, in literally four or five months after I decided or I walked through it, I bought a business and, and now five and a half years later, so we bought six of them total, we're continuing to roll them up. And our goal is to more or less change the way small foundry industry is looked at in this country. And once this takes us another four or five years to roll up all these coast to coast. The guy who we hired now business partner, Jeff Schultz, we're just going to take exactly what we're doing on here and go roll up another small industry when we're done after this, but it'll be in manufacturing that much I can tell you.

Ronald Skelton  3:24  
Awesome. So it's interesting, a lot of the guys that you know, they decide they want to buy a business. They create, they either have their own funds, or they go create a fund. They, they call themselves search funders. But that, that process, usually, on average takes two years. And one of the, the interesting things that happens in the process, and even I'm experiencing this is you get in this like I really want to look at this industry and you start looking at it like I really was on from January until a few weeks ago, I was really into the coffee industry. I was like,  I think I'm gonna do something to do with coffee. 

Reg Zeller  3:55  
Yeah

Ronald Skelton  3:56  
And when you start digging into it, there's some international politic issues around coffee and there's some there's some bad doings inside of the space. I just don't know if I want to mess with drama, right? you know So you know, but that's what happens a lot of times as you get into something take it's got good bones, it's a industry you want to be in and then you start doing due diligence on it and finding things out and learning the industry. Like yeah, that's not the end though you know, you end up finding something like a foundry or something because it you go in and it clicks. So sounds like you I don't know if it was luck or what you just you, you, you came across the first one when you come across like hey, I can make this work.

Reg Zeller  4:35  
Yeah, yeah, we, we looked at a lot of different business listings. None of them really stuck out to me again, not a software guy didn't really want to do home services I've actually worked in we've provided electrical goods to the industry. So I knew what electrician did. Provided thermostats, the industry so (inaudible) all about the HVAC industry. I loved what those guys were doing. Honestly, as I was going through corporate I always I envied them on that side of the table was like, I would much rather be sitting in your shoes than in my shoes. I just didn't want to have that, because I didn't have that really background and experience, you know, for me, I could utilize my manufacturing background. And that was the thing, once I realized, if I kind of separate all these pieces out, you know, the concept or the, the general people talk about Porter's Five Forces, or how you look at marketing, you know, you think about customers, you know, this is almost literally the opposite of what everybody would want to get into from search funds, or what people would want to get into from private equity, micro private equity. And now we've created a space that private equity or micro private equity doesn't want to touch at all, or much too large for individuals. But yet, you know, the big private equity guys are like, hey, now we're liking what you guys are doing, you want to take some of our money will just pay you well by what you have. And then we'll move it over. And you know, you guys can just run this for us. Five years ago, I probably would have taken (inaudible) on that offer. But today, we've done the hard work. And now, you know, we're, we're got a little bit of a gap. But yeah, it went from August 2016. I saw the business in October 2017, or 2016. So two months later, and we bought it in January 2017. So it went, it went really, really fast. But it was partly stumbled into it. Obviously, there's luck involved in finding that. But, you know, once we saw it, it was six weeks of a really fast, deep dive to understand the entire industry and everything I would use or would have done from a strategy, business development perspective, back in corporate to say, hey, I really liked this. And I think there can be something here. I didn't think it was going to be a roll up. And you'd ask me, am I going to buy 20 of these things and have $100 million plus company? Yeah, no way. But if we want to consider I'am a genius, we can definitely look at his, we can change the way history is written out. But that'd be a total lie.

Ronald Skelton  6:58  
That's cool. You know, there's, there's something to be said about the private equity model, if you think about it, because I had Adam coffey. That's why I was looking over here and looking at my big monitor up there. Trying to make sure I didn't butcher the guy's name. Adam wrote two books, private equity playbook and stuff thay he's he was in the heat and air business. And I think it was five or six acquisitions. So he, he started it, he was a CEO of it, he got acquired by private equity, they bought like 80% of the company left him with 20, at 20% became worth more than the 80 over time, because they have acquired and growing. And they did this five times. And by the time they sold it the fifth time that sold for over a billion dollars. If you can imagine like crazy, like, you know, you own 20% of this 20% Of that number, the end, you own some percentage, I don't know if it's still 20. But a billion dollar exit. And, and you've done that five or six times in, in smaller scale. So there's something to be said about it. Now the trick is, do you work well for others, right? That's, you, you a lot of people-

Reg Zeller  8:02  
Not so well.

Ronald Skelton  8:03  
Right, right. So a lot of people think it's sexy, because they get a big, you know, big check right now, but they don't realize they just also got a boss right. 

Reg Zeller  8:10  
Yeah, and after 17 years in corporate, I've had plenty of bosses. I'm good with not having to go back to having a boss. Whatever it is, we'll, we'll go the other side and be the independent as long as we possibly can.

Ronald Skelton  8:24  
Awesome. Now you've got six of them know that right? 

Reg Zeller  8:28  
Yeah, well, four locations. But yeah, we're Minneapolis, Kansas City, Cincinnati and New Hampshire. And so what we typically do is we'll go find in the easy way, geographically, find an area where our customers are based, determine who the best foundry might be in that area, and then buy what we call our beachhead. And then we'll do you know, 123, little roll ups around there and tuck everything in kind of a classic model there, it's not a hub and spoke, it's really more of a COE model. So we might have, you know, one of our facilities specialize eventually and doing high volume parts, another one will specialize in really large parts. Another one will specialize in really complex parts, whatever it might be. And so that allows us there'll be some overlap, and each one of them but what that allows us to do then is invest where you never see those capabilities inside of a small foundry, right? I mean, these are two, three $5 million a year type places, you just can't go invest a million and a half or $2 million. And the biggest thing is when I talk to people now that I, I'm talking all time, you have to stop talking about what you do. And I was like, Well, I've been talking about it for long enough. And I understand the industry, if anyone wants to go buy these shops, that'll be great because they're one key person away from going bankrupt. And that's the big difference for us and them. I mean, you can't go you're doing 4 million a year in sales. You can't go buy a $2 million piece of equipment like we can, and at the same time, you have to then hire white collar workers you have to hire you know, blue collar workers that Know that in, you know, you go buy from a big foundry, they know one tiny slice. And for our guys what we needed a small foundry, they need to know the entire. So you don't have to have that depth you need to have the outside vendors or whoever, or at our holding company level have that expertise, you just can't afford to do it on, you know, the individual piece, which is kind of where we are that nobody else is, you know, and we're continuing to grow. And our purpose will be to stay small and each one of these. So that's really our niche and where we're going to play. Like I told you, the search funder, this is literally what not to buy 101 I kept the hex, you know, you need a lot of money to grow. You know, it's key man risk. Again, it's like every bad thing imaginable. And again, thankfully, I didn't know that, or else I probably wouldn't have done this. And you know, also I'm a little stubborn, someone tells me the stove is hot, I probably still need to touch it anyway to verify. So I wouldn't listen to anyway, so it wouldn't have mattered.

Ronald Skelton  11:01  
So for those that may not know, I mean, you and I had a previous discussion, and I learned a lot about what foundries do is stuff, can you give us a 60 seconds two minute spiel of what a foundry is, and-

Reg Zeller  11:11  
Yeah.

Ronald Skelton  11:12  
 What, what you guys, what you guys do? what you make?

Reg Zeller  11:14  
 It's really simple. And it's been around for quite literally about 6000 years. You know, once we get fire in the ability to find metals that they can melt more or less you create, depending on what it is a negative impression of whatever part you want to build. Sometimes that can be sand, sometimes that can be other metal. And in our case, we have aluminum. So well there's literally heat up aluminum to 1400 degrees more or less, make it liquid, pour that molten metal into some sort of a negative impression form, let it cool, which is called freezing technically. But once that hardens, break away or pull apart the other pieces of that and what you have left is now that actual part and that's literally all we do. And so, for us, we make parts for other people, for the most part, we have a warm, small business that is will eventually going to grow substantially but different story altogether. That is how we, you know, someone comes to us, whether it be on a cocktail napkin, or you know, can be everywhere from literally some guy had an idea and a bottom night with his buddy and they want to make a product, which that's almost our largest customer right now insanely enough to the far end of you know, the biggest engineering companies in the world, the Siemens, the GE is the Honeywell is etc. They want to come in and say hey, I have this part that fits in this widget, can you build it for us in will kind of do everything in between?

Ronald Skelton  12:40  
So how do you see things like 3d printing affecting what you're doing now.

Reg Zeller  12:45  
So there's two different, let's say, three different elements of 3d printing that impact what we do. The first is, you think the classic and what most people think of as plastic, right, depending on the typical, we can actually utilize plastic today inside of some of the technologies we have, and make prototype parts. So though getting into too many details, you can literally print the plastic part, and you can make a form around that out of sand, you pull that plastic part out of the middle. And we can actually make a prototype part within you know, days for customers that used to take weeks or months. So we can utilize that it's not production quality, you know, but it's 95%, it'll get you most of the way there. The second 3d printing is you actually print with sand. So rather than what I just mentioned, you could put a form around it and you form something, this printer instead of putting down plastic will actually print your negative impression of your part, but with sand all the way around it. And you pour the molten metal in there just like a different code called green sand technology that we have. And you'll get a production level part. The third, which I think most people would then think of that know the industry and they wonder, is this going to bankrupt us per (inaudible), or at least ruin it would be actually direct metal printing. And for what we do relatively simple geometry parts. And they're not looking at real complex. I mean, obviously not with aluminum, it's not a complex alloys to begin with. So we are 10,15, 20 plus years away from when we would actually utilize any of that type of technology. So we are integrating, we already have the 3d printed plastic we've used we don't have one in house, but we'll use third party vendors as needed. We just don't have a lot of customers that have value in this with the 3d printed sand and a 3d metal. We're paying attention to it. And ultimately for us, it doesn't really change other than instead of also having workers and furnaces and automatic molding machines, you know, we'll just have rows of 3d metal printing, our customers won't want to go out and buy those things at scale. It won't make sense and once they get to that point, you're looking at the one off MRO something breaks in middle of the jungle, you know, when you're doing a drill or I came from that world at GE, where we were really doing a lot of that with aircraft engines, and there's elements of that, again, where that real complex geometry where saving ounces, or pounds saves you millions and dollars a year, different animal, not not the type of parts that we deal with in, in my title facility. So we're monitoring it, but I don't think I think it'll be after my career before, it's something that will take a material impact from a direct metal printing.

Ronald Skelton  15:30  
That's cool. So I heard you say a couple of times aluminum is you guys make mostly aluminum parts. So you guys actually blend alloys and kind of create different little so we product.

Reg Zeller  15:43  
So we're technically non ferrous, we do have some brass, bronze, zinc in our shops, depending on but we're mainly aluminum. Part of the reason why I like buying aluminum shops over others is the history of bronze, as most people know, would be leaded bronze. And so if you have a shop that is from the 40s, or whenever it was started, because a lot of these are 1940 shops, right, Grandpa came home from the war, the kids eventually took it over. And now either they're ready to retire in their 60s and 70s. Or, you know, the third generation, you know, either doesn't want you to do with it, I've never had it or wants to get out of it already. And so, you know, most of these places, if they started a, a bonds, foundry in 1944, the chances of us eventually finding lead somewhere, is a real high probability. And I don't deal with stuff when there's environmental issues. So finding aluminum shops and expanding them into other nonferrous. Because now there's obviously a lot of non leaded bronze you can use would be something we'd be interested in. But buying direct just it's a mass limiter to what we have, we bought one shop that has it. And admittedly, we got kind of lucky there that they hadn't, it was a shop that was moved in there. It hadn't been there forever. And that's why we were able to get it done. But yeah, typically, typically going to be aluminum, but we'll do other stuff. It's just so it's so similar. The only difference is really it's, it's three times heavier, and it was 1000 degrees more to melt. Beyond that. Bronze and aluminum aren't really all that different beyond and I won't get into the metallurgical aspects of the alloy, we just, we just buy it off the shelf and melt it, we, we use pretty common alloys that are rarely available. We don't add anything ourselves. We don't do exotic metals. Generally speaking, if, if there's a part where, you know, if it fails, that a car is going to crash or a plane is going to fall into the sky or something similar. We don't do those types of parts. We don't want the insurance and you know, there's a lot of ways to make money. I don't need that on my conscience it somehow we would messed that up and 200 people die in a plane crash I'm, I'm totally fine with worry about that in my life.

Ronald Skelton  17:55  
That's cool. So what's the coolest thing you guys make? What if you could just say our strangest, like, what would be something that you got?

Reg Zeller  18:03  
We make all kinds of crazy stuff. The, the two that people love to hear about the most, that three. So one, anybody that is a kid, obviously or when they're a kid in a playground, there's a giant spring you go to you go there's a big horse with a giant spring on the bottom and rock back and forth where essentially the only domestic manufacturer those horses anymore. Really interesting aside is we had one of our customers came to us they had an outside vendor in so for pride fest. They put four giant unicorns to the point where maybe, you know, adult size humans can ride these things. And so they made these giant black unicorns with dual instead of a single spring. Now there's two springs at the bottom. And there's a bunch of people that's now a thing every time my buddies, anybody goes to New York City goes past Rock Center, it's inevitable that I'm going to get a picture of somebody writing one of the unicorns we made. But yeah, other things for any golfers in the audience. You know, we make a lot of the golf ball washers. So if you're familiar with that we make deer stands, you kind of name it so far across the spectrum, but typically, it's either the it's either the ball washers or, or some sort of a playground equipment that everybody likes to talk about. And as soon as people saw that everybody we used to make the horse and everybody would want a horse well now these unicorns are two or three times larger and now we're all my friends see it my nice want one and all my friends too want one and like I have the capacity to get (inaudible) need to right now much less sort of building these things on the side so the, the only, the only person that's getting pulled getting rank on this is my wife. She thinks she wants one so maybe we're gonna have to let her have one but we'll see. It'll be a while.

Ronald Skelton  19:51  
gotta I asked I was curious what the answer would be but I was I would have never in a million years decided that a an adult sized rideable unicorn would be there

Reg Zeller  20:01  
I don't know what it is everybody see these things, they're, they're the it's an interesting I love the company that the customer that we have won't use their name for their benefit, but they hand paint everything. So they will give giant custom playgrounds. And you know, we're able to deliver very fast, so they're able to deliver playgrounds very fast, but they'll come in and they'll literally still have like all those, you can get the general like generic painted ones, but then there's other people that want custom paint. And then they have an artist, they can paint these things. So this one is, it's all black. It's got a big gold chain. It's got the spike, or the fancy horn and then a rainbow tail. So this is it is a big, big draw for a lot of folks. They really love it

Ronald Skelton  20:43  
Hey, Mariel, when we edit this and make it live, I want you to find a picture of that and put it in, in here. I want to I want to I want to see it

Reg Zeller  20:50  
Well, that will absolutely find one for you.

Ronald Skelton  20:53  
Mariel my production rockstars (inaudible) a photo of that thing, put it in. I love I asked an off the wall question at the last one I did. And that was the funnest part of the podcast. So usually, my podcasts are just business, business, business. So getting into what's the coolest thing you've done? So let's, let's talk about your strategy. Your, your looks like you've been doing like one to two a year so far is that your kind of your path, you're gonna stick with that, or? 

Reg Zeller  21:21  
Yeah. Right now. Don't get into too many details we're, we're in the middle of negotiations are about to be for something that is, I wouldn't say it's outside of what we do. But it's something that pushes the boundaries of what we do. And so that one might be where we take down one in a year just because the size and complexity and there'd be a lot of other pieces around it. But generally speaking, we're now at the place where we're negotiating with a few different bankers talking about traditional financing. And so that's obviously a game changer. When someone you know, up until now, we started with an SBA, as we were continuing on, it became we self financed a few of them more or less, it was like cut us a check for the real estate in the asset, you know, 80% of that and will cover the rest in, in cash. The last few deals got really interesting because they were as without saying anything, they're an impaired asset, everybody else looking at it, and never would have been able to run them because you'd have gone bankrupt your first year or two simply because they needed a ton of work, and money poured into them. But those are the kinds of we like because you think right now, I mean, we have a few folks that have already talked to us kind of in that seven to 10 Exit type multiple. But you know, we're able to buy these things for one, two times maybe. And so we take those, we can go raise, we can go increase because of our production systems and the people that we have, and our know how we can a lot of times go increase profitability by 5x. And so you can do the math, you figured out you buy any asset for 1x, your multiple is 10. And you increase profits by five, it's pretty simple math to do. So right now we're a little bit going off of that. And if you can't think about for us, it will be in that two to three per year, it'll probably ramp up to four or five. I mentioned Joshua Watts earlier, he came on and it's just an absolute Rockstar operator, I am just absolutely shitty as an operator comparatively speaking, I can do it, but he did he, he can do it. And he's awesome, and he loves it. So that's the good thing for him. When he pushes through this, you know, he's able to create systems and processes now where we can just drop this on top of it. And within two, three months, we can have practically a foundry that the owners wouldn't even recognize anymore. And so that will be our strategy as we continue on. You know, we may go a little bit off kilter here, I don't, I'm trying to justify in my head, whether this is something that is worth doing. But you know, beyond that, once we get it, we'll go back onto that, you know, you'll buy at least one if not to have these beachheads a year. And then you know, another one do tuck ins, you won't be the same ones, you know, we wouldn't buy a beachhead and then buy immediately, immediately buy a tuck in and stick it inside it would be we buy a tuck in for a different one that we bought last year, let's say and then we'll buy a new beachhead and get those up and running and then kind of go through but we're ultimately it's 10 ish locations across the US. And like I mentioned, we've done 60 We'll have to do another 10 to 15. But you know, by the end of that it's in excess of 100 million in sales. So it's an interesting business and it can't be replicated, which is why I keep talking about it because like I said, it'd be a fun nightmare for everybody else. I wouldn't. There's a lot less for this way. We love it. There's a lot easier ways to make money in the world. There's a lot better businesses to buy If I wouldn't recommend people getting into this,

Ronald Skelton  25:02  
I used to say that about real estate all the time, it's a tough way to make it easy to living.

Reg Zeller  25:06  
It is yeah, it's people will get an out or like, oh, I want to do it you do, how do I get in? It was like, Well, again, it's for the first five years or four and a half years, it absolutely sucked. And now, you know, we're an overnight success, five years in the making, or whatever they call it, even though we're not even close to being successful, or, you know, not even near where we need to be. We're just feels like we're in like the second or third inning of this thing.

Ronald Skelton  25:29  
Awesome. So you mentioned something earlier in your previous statement and talking about buying these, it's talked about the real estate and the acquisition costs, a lot of the facilities you buy own their real estate.

Reg Zeller  25:42  
I personally, I really want it. I'm a liberal. And I get this, every time I talk about this, if I put this out on Twitter, if I talk to anybody, and I always joke like the finance bros, like the guys that run everything on Excel are going to jump down my throat, I'll have 30 DM's about how dumb I am, I shouldn't be buying the real estate, it's not a good cash on cash, return all this stuff. And I, I totally understand where you're coming from, I get it, whatever. But for us personally, our ability to control our own destiny, especially with foundries really helps us it's a hard business to get permitted to be able to run, etc. And I don't want someone to be able to determine, oh, hey, once we get this all built out, we have everything there. Either to say, well, now you're the only person that we're going to have in there, we're going to obviously, take over your rent control or the other side of this, which is someone's like, I'd rather build a hotel here. I'd rather have a, you know, we joke about this, I went and tried to buy a large facility in the Northeast up in New England, because they said oh yeah, we bought this out, we have an industrial park, we really want to find people and I was like, this is perfect. I'd like to buy like 40, or I'd like to get like 40 or 50,000 square feet. And that's what I did. And I'm like, Ah, yeah, we weren't thinking that kind of industrial, we're more thinking kind of like coffee roasters and breweries. That's not the world of us. So anyway, once we get there, yeah, as long as there's not realistic the story, that there's not some sort of environmental issue with real estate, I really want to buy it. So for us, once we get into it, that's great. And then ultimately, is what I tell a lot other people that are doing this, if you're not being held back, by the way you're being financed, or you're not being held back by your cash, and I would understand if people are, this is a way to diversify what your investments are. And certainly, if you fast forward five years, seven years, 10 years, whatever, you know, we've already talked about the only exit that we would have right now is a big strategic buyer, or a private equity firm. Well, neither one of those two are going to want our real estate. So if you think about that, real estate is paid for, let's say it's 300,000 500,000, whatever, square feet of $5 per square foot, triple net lease doesn't suck either that, that feels like for the rest of time, I'll take that annuity, and not be too upset about how that works. And that thing will kick off cash or I mean, again, you can resell real estate as well at that point in time. So as long as we have the funding to go put money down on the real estate, it kind of is a no brainer for us to go buy that. Partly diversification partly long term annuity, but at the same time, it doesn't, it's not hurting us. You know, I can I can see the argument, this is where I get it like we don't, we don't want to go to infinite things. We are very, very focused, Josh and I talk about this all the time, we'll eventually go do a lot of things. But first, we're going to go build this thing out, and we're gonna be the best at what this is. And we're gonna have blinders on until we get there. And then once that's all taken care of, and you're kicking off, you know, eight figures a year in, in free cash flow, that, that makes a lot of things a lot easier to go fund and finance. Just need to you just need to stay focused. I've just seen too many people that go build fiefdoms or go be distracted by the shiny object and I am, I'm a major suffer from shiny object syndrome. So it's a lot of focus for me to not go chase down every random thing that looks like a good business to buy.

Ronald Skelton  29:13  
So let's talk about your long term strategy, right? Is this a buy and hold? Do you guys plan on exited in 5, 10, 15 years? You know, right now you're just playing you know.

Reg Zeller  29:22  
I mean, if, if you were to ask me right now, I don't think we're gonna sell. There's two reasons for that one, I just kind of illustrated. Overly simplistically, once you find something that's kicking off cashflow, I love the idea of going to do something with it. And if you've built all the systems around it, obviously this thing is going to be an exceptionally complex holding company structure anyway, so we're protected. It's not like one thing can happen and we can lose it all. It's a lot of reasons why then, you know, I hear horror stories from so many people. They went they had a great business, they love what they built, and they're spent after they sell All the you know, the next 30 years of their life want to chase essentially what they already had. And so is it gonna be life changing money, I don't know, I don't spend the money that we make now, really. So I don't, I don't know what to do with it I love you know, I have worked in corporate, I could have stayed there and retired and, you know, perfectly fine monetarily, but I was miserable from a, a personal and, you know, kind of career standpoint. And I've created the exact job, I want it now, it took a few years to get here. And I've told Josh this many times, it was always true three steps forward, three, four steps back one step, but who knows, it was always one of those things. And now it's, you know, we're finally getting to the point where I was able to bring Josh on, and he loves being the operator, I get to be the one that just goes to buy businesses, really, that's the job that I love, I love the strategy. I love what this is. So, you know, for us, it's, he's gonna go build all these systems, like I mentioned, and we'll go find the next industry to roll up after we're done with this would be my best guess. And we'll just use the cash flow out of that to go figure out the next thing. And I think beyond that, often, I don't have kids, I tell everybody, this. So, you know, ultimately, my team that builds this is going to inherit this. So you know, ultimately, before this is all said and done, this isn't gonna be my decision, you know, I'm, I'm assuming this will end up in a trust or, you know, something I don't even control, hopefully, long before I'm gone. But, you know, I really want to see something where the assets are protected. And if there's excess cash, there's excess profits, you know, the families can have that. But we've created something that fundamentally has changed, you know, first the small foundry industry in this country. And then the next thing is going to be, you know, the next industry and I, I just, I have keep saying this, I fundamentally believe in small local manufacturing, I think there's a spot for and everywhere, that's not a knock on China, or Mexico or anything else, I just think that there's reasons to have it in each of these places. And so I think we'll be able to continue to do this. And you know, I always joke about this, it goes from, I don't know, whether it's a legacy first or a dent in the universe. Second, some of my buddies argue about this back and forth. But I want to fundamentally change how this thing works in this country. So I don't, I don't see selling, it helps that to be perfectly honest.

Ronald Skelton  32:21  
I love it. And I love that division is, you know, at some point, the employees own it right, or the team help me built it owns it. So, you know, they could look like an ESOP. It could just look like a trust that owns and manages it. And you know, the employees have their jobs, there's all kinds of different ways, I guess you could structure something like that. But uh, it's great to have that vision. Because to be honest, there's two different ways of running it to be blatantly honest, if you were running this to sell it, and five years you there's a lot of things you should be doing, that would be different than, hey, I'm just trying to run this thing, grow it, not pay the tax man as much as. So if you see me fidgeting a bunch, my back is pitching a fit. So moving myself around a lot, because for some reason, my lower back is killing me.

Reg Zeller  33:05  
Yeah, I get your point. I mean, there's specifically that that's one of the things that we talk about, because of the way we think through this. This is what Josh and I talked about. This is the year of we call it kind of the year, the process the year fixing stuff, and he's relatively new steel, he hasn't even been here a full year. But I told him, I'm not worried about making money this year, next year, whatever, I'm not worried about optimizing any of that. I want to do all the things right now. So then 15 years, 20 years, whatever this company is bulletproof. We've done all the things we put the money in now, why, why wait three, four or five years ago, install a piece of equipment that we could be utilizing now, and sure, maybe it makes it a little more difficult today, you (inaudible)that much better three, four or five years, I'm not. I tend to be relatively risk averse anyway. But I understand it enough to believe that we're making smart bets. Granted, we still need to see the return on investment and all the rest of that don't get me wrong. But there is some risk mitigation elements to that. And there are also some things that make us more of that one of one. And the more things we put in there. I'll give you some examples. And we're talking about doing like a lights out level of foundry, which is unheard of in small foundries. It's literally like you'd never see it. First of all, you couldn't afford it. No one would even give you the money for it, but trying to like how do we figure that out? You know, I want one in three, four or five years. What does that mean? Okay, that means that we need to have someone who really understands robotics and automation and all that. Okay, well keep backing that up. What does that mean, to hire a CTO probably now or within the next six to 12 months. And next week, we're literally talking with a guy who would be one of the best CTO candidates imaginable. He has the cyber SEC background. He understands robotics. He's done a lot of these packaging. Yeah, it's gonna be a little different in a foundry. These people don't really exist in foundries today. So you know, we'd be willing to spend the money today and have that person walk through right from the very beginning with us. such that, you know, five years or 10 years from now, we're the only people that are able to do this. And I'm willing to make that, you know, I don't care if we sell it in three, four or five years, as long as we don't bankrupt the company. You know, I don't need I'm taking out the IRS mandated minimum amount of the company today. Anyway, that's all I've ever taken out pretty much to pay the taxes. So it's ever again going back in because like I said, this is about the job I love. And I couldn't say that more say, let's, let's go do that. And tax optimization or any event, I'm like, Yeah, okay. Well, let's make sure we don't run out of cash. That's it. 

Ronald Skelton  35:32  
Right, right.

Reg Zeller  35:34  
 Beyond that, let's go build something really cool.

Ronald Skelton  35:36  
What is your like, kind of, without I know, there's some industry specific type of things. But what is your selected criteria? Are they needed? Like, I know, you said that you kind of branching out geographically? Is there a size like they need to have, they need to be seven figures they need to be so many employees are what's what is, yeah, I

Reg Zeller  35:58  
mean, for us, really, overly simplistic. What we want to do, big customers don't care. They don't, they don't care where in the country we build, they just want to make sure they have a quality product delivered on time. That's it, the rest of it, whatever. They actually like the fact that we have multiple facilities, because that's risk mitigation, you know, one facility burns down or something breaks or whatever, we can pick up their pattern, ship it to another, our foundries and still be making product the next day in so that big customers are fine, small customers. This is kind of why we have why we're geographically dispersed, you grow bigger and bigger and bigger and bigger, you chase bigger and bigger work. And so the reason why we're buying these things that we can cashflow relatively quickly is that we're not seeming or we don't have to have the problem with the chasing the bigger work, we can still stay small. So when the small customers, they want to get up in the morning, get their kids to school, drive up, shake, can see their product being poor, or go have lunch and a beer and be back in time for dinner. And in order to do you need to be within roughly four hours of somebody more or less. So every, every 500 miles, you think about 200, 250 miles kind of as your four hour type timeline. You know, we just have giant 500 mile concentric circles all over the country, we just have them we look anytime in a big geographic or a big population area that we know where this industry is located, we go find the best foundry in those areas. We know almost every single one we've already contacted and talked with all those different places. So you know, if someone was like, Hey, here's a $50 million, I can go execute this as fast as Josh could integrate them. Right now, but that's a different story. But yeah, so from a standpoint of then how we look beyond that, there is the first time I did this, I tell this story, because in my mind, this is a fundamental difference between roll ups and holding companies. For us, you give me five, I if I know what your real estate is, you give me five numbers and call it 15 minutes, I'll tell you how much that foundry will make under us. I'll tell you how much we'll be willing to pay for you. If we're willing to pay for you. That's it in I mean, granted, you have to obviously go through the diligence and verify. But in reality, what an existing foundry does means almost nothing to us, it's really does it have the bones is that whatever we're going to need, because like I said before, we know how we're going to eventually need to lay it out, we know what we're going to need for a size, we know what the building needs to be, we know, you know what the area needs to be everything about that. We've dialed that in, because we've bought so many of these things. And quite candidly, because the third one I bought was a giant mess, and I screwed up so many things. It's made me a far superior buyer to really understand what I did wrong, and what I need to look for and how I can't make that same mistake again. And so those are why when we ever we paint like it is such a strict criteria for what we look for anything that's outside that criteria, I will spend weeks months whatever understanding can I make that something that's inside of our criteria? Or, you know, it's really simple? Is it Yep, this is right down the middle is exactly what we want, we gonna buy this, this isn't going to be really much of a question. So it's, you know, we have our own criteria, obviously, it's industry wouldn't really matter to talk about on the podcast, but we, we kind of know exactly. And people are kind of shocked to know, they're like, so it takes you longer to literally get through security than it does for you to figure out once you land in that area, whether you could buy that foundry like get pretty early on at this point in time.

Ronald Skelton  39:30  
That's cool. You know, the, is there just anything that's like a absolute red flag like, like, you know.

Reg Zeller  39:37  
Environment.

Ronald Skelton  39:38  
Like, I just environmental, like if, if you got lead in the facility, if you've used lead in the past, 

Reg Zeller  39:38  
If you have anything, whatever it might be. Yeah. And there's a lot of issues. I mean, there's part of that, right. I just I want a joke. I want to be a founder than I don't want to be doing site cleanups. I don't need that headache, and partly because the cost of the first people that we bought it from it's a long story. It wasn't even a (inaudible) they owned, it was a business that they inherited through a family that a million dollar environmental cleanup, and it distracted them for 18 to 24 months almost bankrupted the company. I mean, you name it all these problems. And that's absolutely not what I want, like in. So that's the only true red flag, like, without even a question. The other one would be is can we not make the real estate, make what we want. And this is where I keep coming back. This is the this is one of my biggest learnings is we know specifically away a building needs to be and I'm talking like shape, height, layout, configure like all this stuff. And if it doesn't meet that, or I can't build it to meet that. We just can't do it. We can do it as a talk in. But we can have that as a beachhead. So I don't again, I'm just buying it and moving it. I don't care it the other thing. I mean, generally speaking, cultures are really hard to figure out. There are some times like if we talk to a foundry owner that cuts corners, you know, the guy that takes cash under the table does weird stuff like that, or, you know, the employees, they're kind of they're saying one thing, they're not doing the other. They're like, Oh, I'm not really worried about like, if there's any type of that impropriety. It's just not worth it for us, you know, then maybe it best to buy? Because, again, people are like, Oh, well, yeah, you could move that in and like, well, I don't know, if you, I don't know what those customers are any better. What the Foundry is, right? I don't, I don't want to buy those types of folks in my life. So it's really

Ronald Skelton  41:27  
I've learned. yeah, I've learned that customers least in my experience, the customer base is fairly related to the behavior of the company. Right? So you know, any customer like, I there was a, there was an architectural firm, in Texas I was looking at, and in my due diligence, I figured out that the guys that run it managed by screaming and yelling and kicking trashcans, I talked about this on the show, I don't know how to manage that way. And I don't know how to hire somebody to manage that way. Because I've never done it, I don't approve of it. So the culture just turned me off. And I was I just wasn't interested. And then I started looking at some of the customers and their customers are accustomed to have to scream and yell and make things happen. 

Reg Zeller  42:11  
Yeah. 

Ronald Skelton  42:11  
Right. Because who, who else would tolerate being around that all the time? And so, you know, there's, you attract kind of how you run

Reg Zeller  42:20  
100%

Ronald Skelton  42:20  
 where if you've got a culture problem, you know, you I, I just just, you know, you hear acquisition entrepreneurs license acquire just for their customer base. Yeah, you got to be careful, because if it's really bad company, and you know, if you think about if a company has got really bad reviews, and that they're just a poor service, customer service, the customers are hanging around for that are either, you know, bottom scrapers, just wondering for the cheapest price and don't care, or there's something else going on there. So it's at least, if you're going to do your due diligence on buying a cust, a company just for the customer base, probably better do the due diligence on the customer base and make sure they're the ones you want.

Reg Zeller  42:29  
Yeah, it's always funny when people here we, we had one of our one of our biggest customers, we actually fired within the first 18 months, probably a little less than that actually more like 12, 13 months of the business, we bought the first one just because he would come in and his idea of getting things is he would yell and scream at my employees. And you know, he had a guy that he normally worked with. And that's how they went back and forth and the company and that employee was no longer there. And that guy came in and started yelling at our people. And I was just like, hey, guess what? We're not building your current parts. We're not building anything as a matter of fact, like you can come and get whatever you have whatever we have, and but you can go find yourself another place because I'm not I already wants and this is it. I didn't leave corporate to deal with assholes like I've definitely been there. I'm not coming to do it here. And you know what, happily, I had to put up with that and corporate that I've put up with it here because it's my money. So as long as I can pay the bank, your gift wrap you and send you to a different supplier. I'm not interested.

Ronald Skelton  44:03  
I'm extremely direct and often get accused of being an asshole. So somebody says, hey, so told me to call you but they told me they weren't me a little bit. You could be a little bit. Like I just say an asshole. Like, the they tell you my other flaws like yeah, you know, that's all he said. I was like, well, he's kind of blindsided and he doesn't know all the other flaws. You know, I joke around about it. But I also joke around like, I have one national quota, right? Yeah, one for 1% one per, per acquisition. And unfortunately, I sit in that seat. So I just don't deal with it either. But I'm not I'm above the nicest guy on the planet, but I just say what's on my mind. I tell you what I'm thinking a lot of people just can't, can't consume that very well.

Reg Zeller  44:42  
Yeah, that's, that's totally acceptable. I can deal with that. That, that I'm not worried about it's, 

Ronald Skelton  44:47  
I've told more than 

Reg Zeller  44:47  
yelling and screaming it's the threats. It's the you, you (inaudible) just the threat like physically but you're like an employee. Oh, they've threatened to quit over money and like there's the door. Like I dont care, Its not, no one's bigger than the company and you're ruining culture and you will not hold my company hostage at the end of a gun, it just isn't gonna happen. So get the hell out of my place. I mean, it's just been a fundamental. I'll give you one chance pretty much like, Okay, everybody has a bad day something happens. But if it happens twice, nope. Bye. So, you know, that's part of it. I think everybody that's buying a business needs to clearly understand that you can't have keyman risk, it's such an important, you just can't buy a business and then let one person be as important or more important than the business, it just you, you can't let that happen. And just from a risk management standpoint, you can do it, but

you can't 

Ronald Skelton  45:38  
That the kind of solve that.

 The I refer to them as poison pills, right? They just they take everything around them. Right? 

Reg Zeller  45:45  
Yeah. 

Ronald Skelton  45:46  
I had a contractor that was working on with a group of people. And he called me up and said, Hey, you gotta let all these guys go through ideas. I was like, no, no, no, no. And he says, Well, you haven't liked me from day one. I say, No I (inaudible). Problem is your idiot. And your job site, right. And I'm just really direct. And so you need to get off my job site, come get complete your final check. Well, I thought we were friends. I've known you for 10 years, like we are friends. I'll take you fishing and stuff. You just won't work on any of my job sites anymore. Right? He treat you treat people horribly do your work is half what you, you told me your half capabilities you told me you could do. And, you know, I just done with it. So yeah, you know, you got to be you know, I joke around like, No, I haven't asshole quota one and that's me. But it's just because you got to be direct in business right? There's, there's just you know, I honestly believe there's no such thing as a bad employee. Just some people should be, you know, be better employees flipping burgers for McDonald's than they are for me. Right?

Reg Zeller  46:45  
They can make money somewhere, just not in my place.

Ronald Skelton  46:48  
You'd, you'd be great at something. It's just not, not at whatever you're doing here. But it sounds cold, it sounds harsh, whatever. But it's just the nature of business. And a lot of times, if I know what to get out, I'll actually hook them up, I gotta a guy over here that I think it would be a great, you know, you know, you need to pick everything. I think you'd be great at QA, I think you should go over here and be you know, do quality assurance. And I think that would be your forte. 

Reg Zeller  47:17  
Yeah

Ronald Skelton  47:17  
But that's you know, you're not helping me out any here. So, anyway, we're actually at the top of the hour, we're about five minutes left, six minutes left at best. So what if you could just leave one big takeaway, like, Hey, if you don't, if you don't pick up anything else, from our conversation, pick up this, what, what would you say that should be?

Reg Zeller  47:17  
So tell me all your audience, what is the, what is kind of the mix of your audience, I'll try and tailor to that.

Ronald Skelton  47:24  
I would say about 80, 85% of the guys out there listening to the show are acquisition entrepreneurs, either they're doing what you do, they've already got a few. And they're looking for their next acquisition, or they're just getting started, or their search funders, they're looking for their first deal. And they're out there, analyzing industries and trying to pick that pick the first one up. So it's, it's a mix of those guys, and the rest of them are PE and advisors and stuff.

Reg Zeller  48:08  
So we'll this probably the first, I don't know, within a year to be either you're looking or within a year or two of buying. The number one piece of advice that could possibly give is that you have to find a peer group, you have to find a group of owners around you, you need to have your core group of people are essentially doing the same thing. So if you're searching, you know, have them be the same thing. They're also searching, you guys can compare notes and talk about it. Because the day that you take that job, it's the loneliest job in the world. And it's the worst job in the world. Because you grow up in all these companies and you know, joke about you and your buddy sitting in the cubicle, could make fun of the idiot that was running the place and that person is gone, that person is you and everything lands there. So as of, as of day one, you need to have that peer group because it won't matter. I've got a great group of guys that I talk with on a regular basis. And we're at slightly different versions. You know, some people have been in a little bit longer, some people a little less, but, you know, multiple business owners, and it doesn't matter. Like there's guys in there that are plumbers, HVAC guys, there's guys that are almost pure investors, you know, they have like holding companies that buy random businesses, cabinet maker, even you kind of everything in between, in, 80, 90 plus percent of what we talk about is identical, whether it's in a foundry or whether it's in a plumbing company. But that peer group is so important for everybody to have. That'd be the number one piece of advice that I give anybody and then a corollary to right, where what you need with that is that you need to have somebody who is kind of two or three years, maybe five years at most in front of you. And then you need to have somebody that's like 20 years. It doesn't have to be a lot of people but if you're brand new, having someone like myself that's gone through all the ups and downs of five and a half years I can tell you your first 18 months are going to suck at some point in time you go willing to be in the fetal position on the bathroom floor on Wednesday at 2am. I know that

Ronald Skelton  50:04  
What the hell did I do?

Reg Zeller  50:04  
-because every, everybody oh my god, you know how many millions of dollars on a personal guarantee my wife and I, because I've been there, and almost every one of the guys that I know have been there. And then once you know that, that's not that abnormal, that helps a lot. And then there's the person. Yeah, that's 20 years out. But it seemed everything, they may have sold their business or they've gone through that entire process. But having that kind of core group of it doesn't matter to three, we've got like a dozen than there's other group few years. Yeah, everybody, Owner, CEO type, you know, I think that's the number one thing you have to do. Because if you don't, it's going to be the most miserable experience because your friends won't understand you, your spouse won't understand, and you can't bring that home, you can't bring that in all your relationships all the time, there's just so much stress and pressure, especially the first 18 to 24 months that you have other people to talk about that have a frame of reference and get it. And you know, at the same time, you're not going to ruin all your other relationships and process when you want to talk about how your working capital is crushing you because your business is growing and accounts receivable. And they'll be like, yeah, cool, man. I was just wanting to talk about the football team this week. I (inaudible) you no place to get that out.

Ronald Skelton  51:13  
Right, right. So if myself or the audience could do anything for you, what would it be? Like? What's your, what's the one big ask you got out there?

Reg Zeller  51:21  
You know, I would say generally speaking, you know, if you find a diamond in the rough foundry, send them my way, aluminum foundry, but I think I've talked to most of those. So honestly, the biggest thing, you know, beyond saying, you find some folks, and in my way is, if there's anything I can do to help, I've had so many people that have helped me over the years, I just want to give back as much as anything, you know, we're at this point where it's not about the money, it's more about the legacy. And for me, we got our foot in this space. And I think there's amazing resources, you know, your, your podcast Ron, the Twitter feed all the different groups, etc. Yes, incredible. But you know, getting in there and finding somebody and I can mention that 2,3,5 years in front of you. You know, DM's are always open on Twitter, hit me up at Reg Zeller. There's a big group of people. And if I can't help, I probably know somebody that can. So I probably my biggest ask, because that's what you really want to do is go help people transition from, you know, not everybody should be number one. Not everybody should own a business. But if you should, I certainly will do everything I can to help people get across that line.

Ronald Skelton  52:23  
Awesome. And it's been great to have you on the show. We are out of time. So we're gonna have to end the show, but hang out for a second afterwards. I do appreciate being here. It's been fun. I learned some stuff. You make giant aluminum unicorns. I could write, like, get on it. But that's still cool. 

Reg Zeller  52:38  
Well, you can. You've seen, you'll be fine.

Ronald Skelton  52:43  
I ever go to New York. I'll send you a picture with me on your unicorn.

Reg Zeller  52:45  
I can't wait. But then, alright. Thanks, Ron. I appreciate it.

Ronald Skelton  52:49  
All right. You have a great day.

Reg Zeller  52:51  
Thank you, too. 

Ronald Skelton  52:52  
Hey, it's your host, Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150. That's 918-641-4150. Call us and tell us about our show, ask questions, suggested guests or even tell me about a business you have for sale and we'll reach back out to you. Again that number is 918-641-4150. Call our hotline leave us some information. Thank you. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduce first in Napoleon Hills famous book Thinking Grow Rich. With accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think is possible, I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind.