Martinka Consulting's Getting the Deal Done Podcast
Martinka Consulting's Getting the Deal Done Podcast
Business Buyer/Owner Discusses His Journey and Lessons Learned
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Craig Halena îs the owner of Buyken Metal Products and Valley Nut & Bolt. He bought Buyen at the end of 2016 and has doubled sales and tripled profits, all with 2/3 the number of employees from when he bought it.
He purchased Valley in 2023 and is implementing the same improvements. Listen as he discusses:
- Know your strategic advantage
- Acting like an owner not an employee
- Don't say yes to everything (be willing to shed customers)
- Move faster, eliminate bottlenecks
- Improve and document systems
- Delegate and don't be cheap (with employees)
It's not easy owning a business an especially dynamically growing one while making better margins. Craig is truly a success story.
John Martinka
Jessica Martinka
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Welcome to the Getting the Deal Done podcast series. I'm John Martinka. My special guest today is Craig Hanela. Craig is the owner of Bikon Meadow Products and Valley Not in Bolt. Biken is in Kent, Washington. Uh, Valley is in Olympia. And welcome, Craig.
SPEAKER_01Oh, thank you, John. Nice to join you.
SPEAKER_00Telling us a little bit about your background and why you decided you wanted to buy and own a business.
SPEAKER_01All right. So uh by uh by education and initial trade, I'm a mechanical engineer. So I was basically a mechanical engineer in quality for about 20 years, 10 years at Phillips, worked overseas a lot, doing a lot of operational stuff. Um, did what this was with Sonic Air toothbrushes. I left there, went to Microsoft for about 10 years, uh, fixed fixing the Xbox. They had a lot of quality problems at that point, kind of transitioned into setting up uh manufacturing uh lines and productions in about five different continents for them, about 15 different countries that I was supporting. That kind of went uh failed when they had a failed Nokia merger. I got laid off. I happened by just by happenstance ran into you, John, at one of your uh presentations on business buying. I was like, well, that kind of sounds interesting. So no, we you know, we talked about a little bit over the time, and I said, Yeah, that's I I want to do that instead of you know just throwing my hat and or jumping back in the corporate world, you know, I was doing a little bit on that, but I said, well, no, I want to want to trial this uh business acquisition or business buying element. And so uh with your help, you know, we took about a year, you know, to look, you know, go through the process of figuring out what kind of company you want, uh, look for some due diligence, you know, uh after you know, probably the third or fourth offer, um, just by happenstance again, ran into my first company, Bikin Metal Products, uh, which is a primary uh precision sheet metal fabricator. It started back in 1939, and so this is my first kind of first to the industry, you know. I I kind of jumped in there not knowing too much, being an engineer. I kind of know manufacturing. I like I wanted to build something, so I kind of uh this came up and is like it looked like a good opportunity.
SPEAKER_00So okay. So uh what what about the second company? Uh Ali. They were as I recall you telling me they were a vendor to Bikon.
SPEAKER_01Yeah, so and as we progressed through biking for the first, you know, uh I've won for a little over almost seven, actually, seven years ago. I think yes, no, today. Yeah, seven years ago today, we we we closed out on biking. Um, so we went through our uh ups and downs. And last couple years, we have uh started to work with a company called Valley Mountain Bolt down in Olympia. They do a lot of a lot of our galvanizing because most a lot of the stuff that biking produces uh supports the constructions or utilities, stuff parts that are outside to be galvanized. And they they kind of took over as our uh galvanizer of of choice for special small parts. And as well, you know, you know, talking with you and reading your book on you know merger growth by acquisition. It's like, well, I reached out to my, you know, he was my number value, was number my number two vendor at the time. I was like, hey, what's your exit strategy? You know, a few months later, he's like, you know, contacts me and say, Hey, you know, I really don't have one, or my exit strategy changed because of uh my sons have moved on. And so so it's like, yeah, you know, a naturally good fit, you know, they were doing a lot of our our our work, you know, a lot of vertical integration opportunities, great company. And then he's like, Yeah, you know, the opportunities present itself, and as it was kind of a win-win for uh the previous owner of Alliant as well as uh Biking itself.
SPEAKER_00So okay. So before we get to some of the things you did at Bikon uh and uh things that contributed to you doubling the sales and tripling the profit in your term of ownership, uh you just got a nice award or two.
SPEAKER_01Yes. Yeah, so we actually have it right here. So we actually for this last year, we have the CAMS Manufacturer of the Year Award, which is very, you know, very proud that we were able to get that for the team. And basically it's given to companies that have shown a lot of innovation, a lot of employee engagement, uh, have trying to push the envelope a little bit. Um, which you know it's a great thing that being awarded and be recognized in the in the peers. Um, and also I was I was honored to get the finalist for the uh manufacturing leader of the year award. So again, it was awesome stuff, but you know, getting the one with the with the overall team was great. You know, they it's a great aspect of kind of saying, hey, we're we are going the right direction. People are acknowledging what we're doing, and we we've established a great team that we can really kind of keep leveraging and pushing the pushing the growth, sales and the uh profitability, uh, as well as making actually the most important part is making it a better and better location to work, you know, improving the work environment on a daily basis.
SPEAKER_00So okay. So you came into Bikon at the time the company, you know, was many decades old. You said it started in 1939.
SPEAKER_01Yes.
SPEAKER_00So uh uh almost 80 years at that time. Um of course you had to do some things. I mean, that typically happens when a company's been owned by the same same people for so many years. So let's talk about some of the things that you did and let's start with the people.
SPEAKER_01Yeah, well, you know, the you know jumping into a company of the year, you don't know too much. Yeah, it was owned by the same family for 44 years prior. Uh, so there's a lot of legacy of how this is how we done it, this is how we haven't done it. And and I kind of I got in a hole pretty quick. You know, I bought the company in December. Uh December, January, February are typically the losing months of the year. So in a matter of three months, I was $400,000 uh in the hole, and I didn't even hardly know what what I was doing yet. So uh so there's a lot of challenges to that. Um, yeah, and then in terms of the legacy and the culture wise, you know, one of the things is you know, we have to you know get away, start getting things a little bit more clean uh clean, a little more organized. You know, we still have a thought that way. Um, and then you know, I've actually started over the last few years to figure out, you know, the really big pitfalls was the owners, myself as well. Uh uh, because uh, and I kind of fall a little bit in the shoes, but I was kind of fighting this a little bit, is basically am I an owner? Am I an employee or I'm an owner? Uh, and it was always been based around an employee first and then owner second, and trying that culture around a little bit from the hierarchical standpoint, that's been the bigger challenge. And one of the other elements that's really drove it is you know, saying yes to everything. We're always chasing the money. We can make money here, but you know, never really in the in the in terms of the culture-wise, really understanding the opportunity cost. If I do this, it chart it, I can't do something else. If I take this job that's I've been doing for 30, 40 years, yeah, I make uh 100% profit on it, but I forego doing $20,000 of jobs. And it's like, yeah, and so you're constantly kind of undermining what you're doing. You're trying to be jack of all, master of nothing. And that's really, you know, we we bounce back and forth. We had big comp customers, they come in and they come out, you know, and it's just we're losing our identity, you know. And really, in the last three years, we basically said, you know what? Um, we're gonna really identify what is our what is our strategic uh advantage? Where do we actually do well? Uh at that time we were doing uh our number one customer was SpaceX, which is doing stuff for the um satellites going up in space, you know, it was really cool meteorite shields, oh it's all fancy and all that. And the next job we're doing is going to dirt, you know, construction stuff. It's like we can't, we we can't be precision, high-tech, and then industrial, low tech, non-cosmetic, and back-to-back, you know. So we actually we actually forego, we say, you know what, spit the SpaceX is the world, we're not gonna do, we're not gonna support you at this time. Uh, we want to make we kind of keep them in the back burner, but until we have a real good space. You know, we're we're set up to we can be successful by reducing our scope, reducing our customer base from like 140 to like 70 or so, but make it so you know we're we can engage with them at a much higher level. And so when we start doing that, then we say, okay, you know, it allows our our our operations to be not so much randomized, and so and they get a lot more rhythm. You know, in the past we were probably 80 job shop stuff and 20 like kind of repeated production, and probably in the last two years, we were basically we're basically 90 OEM kind of uh contract manufacturer, we're doing the same thing and about 20 job shop stuff. Um, so that has helped uh tremendously, but that also makes it so our we need to look at our uh our IT systems, you know, IT systems are you know, they're just solid, they're normal for our job shop, but they're put in place in the 1990s, late 1990s around a job shop, and we're in the process right now of of of going through an um an evaluation, or we're actually making the call today on which new ERP system we're gonna use for both companies. Um, so that's done uh that'll be awesome because you know the IT systems have to pull you forward. But in terms of some of the operational things we've we've doing, uh we we took a big gamble on one of our biggest customers now. We actually bought in a lot of equipment uh prior to even having some significant work with them. We put uh we invested well over $100,000 and we were only doing maybe $10,000 or $15,000 a core with them on some tooling because I say, well, I think there's a good potential here, and let's do it right. And we bought a lot of automation, we have complete robotic, you know, we don't we change transition to a lot of manual robot, uh manual welding to robotic welding, uh, which dramatically increased our output. We're we are producing a million pounds of steel a quarter versus we're we're doing maybe a quarter million pounds of steel quarter prior. Um, and then we're just we're getting a lot more leveraging of our our people. You know, we're trying to or ups, we're upskilling you know our what used to be um a guy or gal doing welding on the side, you know, this and that, and no, they're they're programming robots now. Uh so that's been a tremendous help. You know, we're in we're right now we're at 23, 24 employees, if you include myself, and we're doing double what we were doing two years ago with 39 people. So, and that that just all goes down to the bottom line, and a lot more efficiencies, a lot more uh repeatable product. Um, and we've and we continuously are looking at new ways to enhance our our uh our products and our quality. You know, we're starting to do some reliability testing, and we've piped in, you know, uh we're we're getting away from mixing gas on site, or doing mixing, getting away from bottles, we're doing just continuously looking at how we can uh get more for less.
SPEAKER_00So okay. How how did the people who have remained take to all these changes?
SPEAKER_01Uh they don't, you know, most of the people that are here, uh 80% are here. They were, no, maybe 75% are the same people that were here when I bought. Um, so the ones that have been around, they they they have been very receptive. You know, sometimes one thing that we had to do is, you know, we had to take them on some tours. We have to see we had to show them, you know, what it is like outside the four walls because it because there was the prevalence of we've always done it that way. Um, but you never know. You can't expect somebody, hey, how do you do this differently if they never know? So we did a lot of tours. We brought them around to places uh to kind of get them the juices going, you know. Um, and seeing that, you know, how fat, you know, how people can do things, how it can be your your work environment can be better, how it can make your job easier, you know, automation and all that doesn't take away from jobs, it again alleviates the dull, dangerous, and boring stuff. Um, and it takes it takes a while. Um, and kind of my one of my lessons from that, from my current one, is um I can go faster. You know, I should have gone faster if I knew more of you know, instead of following a little bit of the legacy of the previous owners, of like you know what you need to do, let's just make a wholesale uh change and make it fast. Okay and that in an instance leading into Valley, Nut and Bolt, you know, great company, a lot they have a lot more workers than Biking does, uh, about 39 employees, about half of sales. Again, the old legacy, um lifestyle business, a lot more disorganized a little bit. Um, but you know, we have we have been pumping out a lot of product down there. Uh, we're going through, you know, we upgrading their systems, you know, we put a server, never had a server, didn't have a server down there for equipment. Uh, we went from a biking, what biking did in a year in terms of getting the HR management system on your phone and payroll, uh, which has been great. Uh, Valley did in six weeks. So we're leveraging our learnings and say, hey, let's go faster. Uh we've been doing doing a tremendous amount. You know, we're changing the ERP of both, you know, in a matter of by April 1st, they're gonna go from a uh ERP system that hasn't been updated since 1991 or it's green screen to a modern one in like six months. So it's gonna be amazing. It's going very fast for them, but they see some tremendous benefits.
SPEAKER_00So okay. So you're putting a new ERP system. Uh you talked about the uh automated welding and you know the HR payroll going into you know e-versions of stuff. Yep. Uh any any other process improvements and uh and I'm gonna ask because I heard that I've heard this others. One of the issues with some of these legacy businesses, the we've always done it this way, is a lack of documented systems.
SPEAKER_01Yeah, so you know, we have uh about three or four years ago, we uh became an aerospace certified AS 9100 shop at Baikon, uh, which is a big thing. Uh we're still, you know, uh, because very few jump into that space, especially at that time, a company that's basically 80 years old. And so there's a lot of documentations, a lot of different ways of doing things. You know, we're not perfect. Um, and we we we've done quite well with that, uh, in spite of our IT system that doesn't support it. Um, and and the aspect of not really having the you know the horsepower to manage those systems. And what I've done recently is we actually have a former QA auditor that works as a 1099 employee. He manages your QA. And we actually have our AS audit this Friday. He's doing it. I used to be doing it, you know, by trying to run the company and be the head QA person and head it that doesn't work, you know, your spread too thin. Um, so you know, we we've got our ITAR as well. Not necessarily because we've used it, because some of the customers asked for it. Um, but we're at the point was we we have improved our qualities, but we need to improve our systems that allow us to do it uh easier. Now people like people understand the importance of it, and you know that we're basically an AS certified under brute force management, a lot of external Excel spreadsheets, so managing you know, whether it be calibration or audits and that versus it kind of integrating the system in the next rev of our IT system, that's gonna be much easier because it's gonna be integrated into our overall IT package.
SPEAKER_00So okay. So you mentioned that when you bought Valley Nuts and Bolt, one of the lessons you had learned from Baikon was uh move faster on things. What other lessons, you know, what challenges you went through and any other lessons that you learn that others could benefit from?
SPEAKER_01Yeah, I think one of the big things is uh, and they've fought that a little bit, is uh having the owner being a bottleneck. I mean, even just changing, you know, whether it be an account or a bank account, or not necessarily bank accounts, but you know, website things are all this, okay. Well, how do what name do I put on there? It's all about the owner. So you're you're building in systems, processes, and tools where the owner's the bottleneck of everything. So when I when I we've been upgrading our system down there, it's like, no, the system's not about me, it's about the company. So how do we you know set up accounts, set up the processes so that it's not I'm not building in bottlenecks from the get-go. Um, and one of the bigger things, you know, I've learned, especially, you know, I'm looking back in terms of this last acquisition, is uh we went too slow in the acquisition. It was too slow one thing because of the previous owner, and I hey we want, hey, let's do it to do it ourselves, versus hire somebody like yourself, John, to manage the acquisition. We we should have closed the deal five months earlier than it than it was, but we're busy running companies and that, and that's not our our expertise. We could find the companies, but really having a better acquisition team and use them um because yeah, we closed in July, but we were we should have closed in February. Um, but there were just you know things that we didn't know. We were trying to run, we're we we we just got kind of hung up on the day-to-day has, and then we look at the opportunity cost of not closing out a deal five months earlier. Yeah, that was that was a lot of money that you know, spend somebody 20, 30, whatever would be in terms of consulting to help drive it, it would have paid for itself way more. Um then I would have been I would have already been in my new ERP system now versus playing around with it. So I think one of my biggest learnings is is the delegation side, just because you can do it doesn't mean you should, and don't be cheap. Uh spend the money, get the right people on the on your team, whether they are a full-time employee, a 1099, or a consultant, get them on and just go and let that let the horsepower work.
SPEAKER_00So I think the most important thing in all that is you said don't let the owner be a bottleneck. And I every time I hear someone talk about that, I hear I think about my past clients. I did five projects with this company from uh you know acquisitions to try uh potential sale to an industry company. But the one that always stood out was when he brought me in to figure out what was going on, that they weren't making what they should, and did focus groups with employees, management, all kinds of stuff. And it was a simple answer: you're the bottleneck, everything has to go across your desk. And we, you know, we put in a delegation. I I put in a delegation process with him to get him to do it, and his profit quintupled went up five times.
SPEAKER_01Yeah, it's amazing. It's like and that's probably the hardest part that those at Valley are. I'm not there. It's you know, it's an hour and 15 minutes from my house. I go there twice a week, uh, not because I necessarily need to be, because I'm not a part of I don't have any transactional activities, but I'm there to come support and say, hey, give some guidance and where we're going. But not having that person there that's making all the decisions every day. It's like you guys, you guys are expert, you know how to do this. Let's let's when we revamp the system, let's make it so it's self-sustaining, not hey, if I get hit by a bus, everything falls apart again. It's like that doesn't work. So I think that's they're starting to get around with that. That's the hardest part, you know. When they you know had a uh owner there that's been there basically 50 years, and his house was right next door. And so it, you know, he's there every day, you know, all the decisions go through. Great guy, great people, but you know, you're again limited to what one person, you know, one person can only manage so much. You know, I thought I I see, especially in the manufacturing space, I guess that's where I'm more familiar with now. Most company companies get to the two to five million in sales, and that's as far as they can go, because that's as far as typically somebody can manage. And though if they want their their hands on all the strings of the company, that's as far as they go. And so letting go of those strings and and and and helping out with the continuous improvement stuff, and then get helping give them some guidance, but but not putting yourself in terms of a a bottleneck, that actually allows you to grow tremendously. Yeah, and and talking like biking, you know, we've we've gone, yeah, we've tripled our profit in the last year and a half, like some of these continuous improvements, but also getting my myself out of there and actually saying no. And it's the aspect of value, yeah, they're they're not uh they're not financials are not robust, but I I I'm guessing in the next year and a half, you know, they'll be on a similar s trajectory. You know, uh Viking is running almost four hundred four hundred and fifty thousand dollars in annual sales per employee. Uh Valley's running about a hundred and fifty, about three times three X the efficiency. Um, they're not gonna close that gap overnight. Um, but the They will. They're gonna go they'll be significantly better. And I'm not it's not just about, you know, more profit to the companies, but how to make the their work environment better. Just like the HR management system, it you know, we put a payroll system. It it looked in terms of our accountant, our controller, it was taking her three days to do payroll. It takes her two weeks, two days, two hours now. So now you know, so spending two it's 250 bucks a month for a payroll process that that saves your controller two and a half days of every payroll. You know, that makes her life so much easier. Yeah, um, and so in and looking at that that train of thought of of all the positions, you know, one of the big things with our legacy IT systems is it's very hard to train people. You know, you require uh A team players. You know, I don't want to build A-team process, I want to put systems and tools that allow a B team or a C team player to act like an A team because I can't scale eight A players, they don't exist. So you got to build your company around having solid people, but not have to be you know the you know the the people that you can that are one in a million, you know. I want to find solid people, provide them with the systems of tools that help them to be more efficient.
SPEAKER_00So and have have your employees, especially on the shop side of the business, have they uh been pretty good about they like about these changes? They like to change.
SPEAKER_01Yeah, so they like to change. You know, we we we instituted like a quarterly bonus. No, we were like five or six quarters in a row, we give them a bonus. No, I'm I'm very open kimonos on the books, and this is what exactly what we're doing. This is exactly how the company's uh performing. This is our our objectives for the quarter, and they're and they're they're kicking ass. You know, we double our output with with less people, you know, and they say the company does well, you do well, you know. Everybody, even if they work one day of a quarter, and we get a they get a bonus. It's a prorated one, you know, might be not everybody's the same, but everybody has a skin in the game, yeah. And so that's nice. And then the other aspect of this, you know, we're you know, from the HR side, um, one of our goals for 24 is just start some kind of financial literacy and some training for the employee base. So you know, train them, you know, educate them on financials 101, probably be a third party so they they don't listen to their owner that's talking about some stuff, but help them out, you know, they're all struggling to some degree, some of some, you know, just because of you know the nature of things are more expensive, or just not understanding how to manage their time or money or whatever. Um, so we're gonna have a third party come in and start implementing this. So, because we don't want to have the aspect of giving a bonus out, and the next day somebody comes in with a new car and it's like, ah, damn, why do you do that? You know, that's not a financially wise thing to do. So stuff like that. So, you know, we doing as much as we can for the company side, but then from the personal side, giving them the opportunity to do talk with a financial advisor to understand the benefit structures a little bit better. You know, we have a pretty extensive benefit, you know. We pay 100% of insurance, we do we do maternity, paternity leave. We do grandma and grandpa. You have a you have a kid that's born, they get a leave too. All this stuff, but they don't sometimes they don't really understand all that. Uh, so that's my fault. And I need to work on uh putting an educational system in for our employee base as well.
SPEAKER_00Okay. Uh final thoughts, Greg.
SPEAKER_01Uh, I think right now, you know, for me, it uh there's a lot of great opportunities out there, uh, especially with the baby boomers. There's 10,000 baby boomers uh um retiring every day. You know, I'm looking actively to buy more. Um, I think the biggest thing is to delegate, don't be perfectionist, move fast and take advantage of opportunities. You don't know what those opportunities will be, but uh try to build up your systems and your teams that that are ready for something when it becomes available. Uh but don't just sit back back on your laurels, uh, clean up your clean up your books, clean up your team, and really assess what are your true strengths are and don't try to do too much.
SPEAKER_00So okay. Very good advice. Uh to wrap up, this is Craig Hanela, the uh owner of Bike and Meadow Products and Valley Nut and Bolt, and the recent recipient of the Camps Manufacturer of the Year Award. Camps is a manufacturing uh industry trade group in the greater Seattle area. Thank you, Craig.
SPEAKER_01Cool, thank you, John.