Hernan Ricaurte of Ricaurte Precision | Capacity Ep. 18

Sunny 00:00

Welcome to another episode of Capacity. Today, we’re here with Hernan Ricaurte of Ricaurte Precision. They’re a precision manufacturer in Southern California working with aerospace, defense, and medical OEMs — AS9100 work, components for particle accelerators and rockets. A lot of cool stuff on the shop floor. Welcome.

Hernan Ricaurte 00:36

Thank you. Appreciate it, Sunny.

My parents are Colombian. They immigrated to the East Coast, met there, and my sister and I were born in New York City. My parents wanted a more stable upbringing — safer public schools — so we moved to Southern California when I was seven. It was a big move. I came with the accent and everything. Looking back, the culture was very different. My father was a machinist.

Sunny 01:10

Was he a machinist in New York too?

Hernan Ricaurte 01:11

Yes. As long as I can remember, he had two jobs — full-time day and full-time night — working for aerospace companies like Loral and some local firms here. When I was in high school, he started the company. I had nothing to do with it. I came in one day to help, measuring pins with a micrometer. I made mistakes, got yelled at, and didn’t come back. It was bad.

Sunny 01:50

How long after he started the company were you asked to help out?

Hernan Ricaurte 01:55

Thirty years later — literally.

Sunny 02:00

Do you remember him starting it? Was it a big deal to take the risk and open a shop?

Hernan Ricaurte 02:05

My parents are conservative and mindful about not bringing stress home. I’m sure they felt some, but home was stable. I graduated with an economics degree, went to Japan, studied Japanese, and got a job at a medical device company.

Why Japan? I graduated high school in ’87. Back then, Japan’s economy was booming; projections said it would overtake America. I was interested. When I graduated college, the U.S. economy wasn’t great, so I thought: I’ll go for two years, master Japanese, and come back. I ended up spending about 10 years there total, going back and forth, all in healthcare and medical.

In 2016, my father was thinking of selling the business. My sister, my brother-in-law (a retired CFO of a public pharmaceutical company), and I looked at it together. That’s when I considered giving it a shot.

Sunny 03:37

How do you go from never setting foot in the business to considering buying it — putting your financial future on the line?

Hernan Ricaurte 03:48

It was a huge step. My children were very young and we were living in California. My career was deeply embedded in Japan. For about six years I was two weeks here, two weeks in Tokyo, back and forth. Seeing my boys cry when I left for the airport was tough.

I also recognized how hard my dad worked. Selling the business for what was being offered — essentially assets and a customer portfolio — didn’t feel fair. Those two things and the appeal of a new challenge led me to the decision.

Sunny 04:50

What was the scale back then?

Hernan Ricaurte 04:54

Small. Less than a third of what it is now — almost four times larger today.

Sunny 05:05

Did buying the business change you more, or did the business change more to fit you?

Hernan Ricaurte 05:16

Both. The business definitely changed. My father was in third gear — mid-70s and tired. I came in during my 40s. It wasn’t the usual generational conflict. He essentially handed me the keys and let me make decisions and mistakes.

Sunny 05:52

Was there overlap?

Hernan Ricaurte 05:54

Yes, about a year and a half. Then he felt I had it. He took off to ride his bike. I’m fortunate — my parents are in their late 80s and super healthy. My dad rides 180 miles a week. They’re comfortable and life is good.

Sunny 06:21

What was your journey learning manufacturing, since that wasn’t your background?

Hernan Ricaurte 06:31

Steeper than I anticipated. Contract manufacturing isn’t easy. We have to abide by OEM designs and documentation. Expectations are high, appreciation is low, and the complexity is underappreciated. I spun my wheels the first two years — made a lot of mistakes, especially in costing and cost accounting.

Sunny 07:25

What do you mean?

Hernan Ricaurte 07:28

I had a “take the job” mindset and strangled us learning. That’s how you learn, but fortunately the mistakes weren’t too big.

Sunny 07:41

What was the moment you realized you needed to change?

Hernan Ricaurte 07:46

Looking at the P&L at year-end. It forces discipline — organizational and financial — and makes you see the holes and the opportunities.

Sunny 08:07

Growth takes cash, and you’re almost 4× larger. Your dad was at the end of his career in third gear. Were you in sixth?

Hernan Ricaurte 08:28

We all like to drive 100 mph. My father always did, but he got tired. I tried to be careful, but I came in in fifth gear and moved quickly. After the second year, we’ve been in fifth gear across the board.

Sunny 09:06

Was the whole team on the same page, or did you outpace some of them?

Hernan Ricaurte 09:13

It was different. There was a lack of structure, discipline, and processes. Coming from Japan, where discipline and attention to detail are crucial, it was frustrating. The machinists were good, but there wasn’t appreciation for the processes required to grow.

When I came on board, we didn’t have AS9100 or ISO. I started by evaluating ERP systems. We implemented a paper-based ERP, outgrew it in two to three years, moved to a digital ERP, outgrew that, and today we’re moving forward with what we feel is a great ERP in Fulcrum.

Sunny 10:18

What from Japan fit American manufacturing culture, and what did you leave behind?

Hernan Ricaurte 10:32

Japan and the U.S. both have strengths and weaknesses. In Japan, extreme attention to detail — but also paralysis by analysis and bureaucracy. In the U.S., we can be sloppy, but aggressive; we make mistakes fast, which is a huge benefit, and we’re world-class marketers.

Here, I kept the attention to detail, but became more aggressive in sales and marketing. Ultimately, people are people — you find ways to connect.

Sunny 12:16

Japan adopts tech slowly; aggression isn’t the growth method. Here you’re aggressive and adopting tech fast. Was that always in you, or is it this business?

Hernan Ricaurte 13:00

Precision machining still has a lot of old-school, archaic aspects. In Santa Ana alone there are at least 200 “machine shops” of varying sizes. I hate that term — it implies dirty, dark, dingy, tribal knowledge, and lack of process. We do sophisticated work, document meticulously, and hold tolerances to 0.0001”. We should use accurate terminology and communicate the complexity so customers appreciate it.

Sunny 14:31

When you started eight years ago, where was the industry culturally?

Hernan Ricaurte 14:41

It’s changing. Many baby boomers are retiring; some without succession plans are selling for pennies. PE firms are active — some well, some not. Many hit the hard reality of how tough contract manufacturing is. There are fewer shops now. We struggle to find and train good people — in part self-inflicted due to fragmentation.

We’re on a major street; people walk in weekly looking for work. It’s not a shortage of candidates — it’s too much mediocrity because many companies lack process and discipline. Talented people get stuck in weak cultures.

Sunny 16:29

Is fragmentation related to the culture of mediocrity? How do you fight it?

Hernan Ricaurte 16:42

Economies develop out of fragmentation. Competition will weed it out. Money attracts interest — hence PE. Southern California has huge biomedical, defense, and space industries that struggle to find good vendors. Companies investing in people and technology will come out stronger — that’s the boat we want to ride.

Sunny 17:35

You underestimated the difficulty but pushed through. Culture expects easier paths; fewer people may grind.

Hernan Ricaurte 18:00

We only live once. Make your parents proud. Do something with your life and reach for the stars. Every minute matters. If you’re not bettering yourself and those around you, from my perspective you’re missing the point. It may sound harsh, but that’s how I feel.

Sunny 18:22

We can’t do it alone. We need to create pockets of culture around us.

Hernan Ricaurte 18:34

Agreed. We believe in teams. We use sports analogies. We don’t say “family” — you can’t choose family; we can choose who’s on the field. If you don’t have the right players in the right positions, you lose. Business isn’t personal, but you need the right team to reach goals.

We’re careful about who we bring on. We onboard with our best cultural ambassadors, not just the most technical. If you want to grow and be part of a team, it’s the right fit. We can’t babysit for long or carry the wrong teammates.

Sunny 19:55

What’s your hiring success rate?

Hernan Ricaurte 20:01

I’d like to say 70–80%. When it’s wrong, we decide within the first week or two. If you haven’t figured it out by week three, you’re not onboarding properly.

Sunny 20:20

Your culture feels low-bureaucracy with decentralized decisions. How do you balance values with autonomy, especially as you push more decisions to the shop floor?

Hernan Ricaurte 20:44

We don’t want people waiting; we want ownership. Digital ERP, digital quoting, and machine monitoring enable autonomy: no excuses — info is there. Once it’s at your station, you own it. Decisions require investigation, responsibility, and teamwork.

We reinforce with all-hands meetings monthly and bigger quarterlies. The last theme was decision-making. We saw hesitation with new tech, so we ran exercises: what’s stopping decisions on the floor? Teams articulated blockers, made it competitive, created drawings, and we’re turning them into posters. Focus: we make decisions.

Sunny 22:32

Why prioritize that on the floor?

Hernan Ricaurte 22:38

The team knows we need machines running. A thousand things can stop a machine — uncertainty about tolerance, finish, tool, or program. Paralysis by analysis is easy. Not making a decision is a decision — and not the one we want. Taking risks is how we learn. We want people comfortable making decisions and mistakes.

Sunny 23:17

Your team is conscientious, but you still need some disagreeableness to move forward.

Hernan Ricaurte 23:43

We’re aggressive. I am; Randall, our Director of Operations, is too. Our strengths are our weaknesses. My passion is both. The team knows we care — that’s why we push. If they improve, the team and organization improve. Communication is critical, and being genuine and vulnerable about your own strengths and weaknesses matters.

Sunny 24:30

How do you keep that passion from becoming counterproductive? Any techniques?

Hernan Ricaurte 24:50

I cringe weekly at something I said or did. Having teammates who tell me, “You were too rough,” or “He didn’t understand you,” is vital. We need an open, 360° management team. Well-intentioned isn’t the same as successful. We have to be aware of strengths and weaknesses and help each other.

Sunny 25:40

Many think they must grow before hiring, but often you hire to grow. You assembled leadership early, before need. How?

Hernan Ricaurte 26:13

Chicken-and-egg. We weren’t at $5M yet when we bought our first Matsuura 5-axis pallet system — a $1M machine. We’re committed to growth — sink or swim — so we make high-dollar investments in machines, tech, and people, as long as they’re the right ones.

It’s not just money. People feel part of something. Growth is because of them, and knowing that matters.

Sunny 27:24

Do you cut ties with investments that aren’t working — machines or tech?

Hernan Ricaurte 27:40

Yes. It’s not personal. With the right vendor or partner — capital equipment or digital — we’re brutally honest in a caring way because we want them to improve; if they do, we do. We’re direct about ROI and expectations. No regret about being transparent.

With customers, same approach. We often have to be the adult in the room. Young engineers may lack experience with GD&T or machinability. We’re direct and hold them accountable. Quality planning surfaces issues like over-tight tolerances or finishes that blow tolerances. We go back to the customer because if they don’t grasp what it takes to make their part, we’re not helping them.

Sunny 29:36

We see four disciplines in a shop: culture, making the thing, the business side, and sales. You seem to hit all four. How do you balance them and preserve the magic as you scale?

Hernan Ricaurte 30:33

Our metrics and monthly/quarterly reviews cover all four. Culture is real — our values are on the wall and in evaluations. People must articulate how they live those values.

I try to be transparent so I’m not the only one stressed. When I walk the floor, people know the priorities and their roles in meeting them.

Sunny 31:55

Snapshot then vs. now: what was hardest to change? What unexpected change had the most impact?

Hernan Ricaurte 32:12

Processes and procedures are the hardest.

Sunny 32:17

They can feel “corpo.” How do you keep it authentic but structured?

Hernan Ricaurte 32:27

Repetition from different angles. Discipline in planning and implementation. Any technology we bring in must become part of the culture. Communication, all-hands, and transparency around objectives make it stick.

Sunny 33:08

Did your faith in process ever get tested?

Hernan Ricaurte 33:31

It’s a grind — like the gym. You tear muscle; the soreness means growth. Same here.

Sunny 33:53

As you grow, it’s easy to play not to lose.

Hernan Ricaurte 34:07

We’re still small and keep an underdog mentality. We see many areas to improve — that drives us. Seeing employees grow is motivating. New tech brings waves of energy: now we can do this; now that. It’s all stimulus and opportunity.

Sunny 34:55

You’ve almost 4×. Ambitions to 4× again? What must the company look like?

Hernan Ricaurte 35:05

We have a growing middle-management team. They need the next level of knowledge, confidence, and decision-making. When they get there, sky’s the limit. We’ll keep working with the right partners, technologies, and customers. We review customers annually — who to fire and who to focus on. Internally, leveling up middle management is key.

Sunny 36:07

Where is the industry headed?

Hernan Ricaurte 36:24

There’s opportunity in chaos. The first half of 2025 has been chaotic. You have to stay grounded and communicate with customers, vendors, and your people.

Rockets and eVTOLs are everywhere. With today’s funding environment, companies can raise hundreds of millions privately. Things move faster — good and bad. They’ll either succeed or disappear quickly. We must gauge how they’re doing, how they treat us, and how they’re structured, to stick with the right customers and industries.

Large primes move slowly and are bureaucratic; I can’t relate to that culture. Startups are more cavalier; they’ll fail fast or succeed fast. We haven’t fully matured into a single niche. We do manifolds well, Swiss well, wire EDM well, and we’re good with automation and production. We just haven’t picked the one area to outshine everyone else yet.

Sunny 39:01

Machines are pricier. That pressures tiny shops and also makes huge insourcing bets harder. Does this help mid-size contract manufacturers?

Hernan Ricaurte 39:44

With capital equipment plus AI and related tech, we’re doing things better, documenting better, more transparent, and more efficient. But you need to surpass a threshold for it to make sense. Very small companies lack bandwidth to cover all bases; very large are too bureaucratic. Mid-size contract manufacturers are necessary for DoD, space, aerospace, and medical.

3D printing vs. machining is another conversation, but for the foreseeable future it’s a combination — again favoring mid-size contract manufacturers.

Sunny 41:04

Our engineers feel threatened by AI. Your industry faced similar fears earlier. Advice?

Hernan Ricaurte 41:20

It’s an awesome problem — exciting times. AI is a necessity. We love it. For middle-management interviews we ask: How are you using AI, and how would you use it in this role? If we get a deer-in-the-headlights reaction, it won’t work.

Sunny 41:56

What percentage get the deer-in-the-headlights look?

Hernan Ricaurte 42:03

About 30%. Still a lost opportunity. What’s your reaction when employees ask about job security with AI?

Sunny 42:18

I hope we’re all expected to upgrade ourselves. Software was protected for a long time. If tech lets us build more useful things, that’s what humans do — build tools to do more. No role is uniquely safe. The question is: do I want to keep being productive and useful, or give up? If I continue, I must use the tools.

We experimented early — even before public APIs — in marketing and product. We spent real money and pressed pause when it wasn’t useful. Every 3–6 months we re-evaluate. In the last few months something changed — tooling, models, orchestration — and the pace feels faster than any shift I’ve seen. The hard part is timing: too early wastes money; too late and you miss the wave. Uncertainty is the most painful part.

Hernan Ricaurte 45:26

If an engineer is genuinely worried AI will take their job, maybe AI should — they’re not busy enough. They should be excited to use these tools to empower themselves. AI and automation are tools; people still have to make decisions. Models don’t know what’s best for RPI. Our people do. Use AI to help them decide.

Sunny 46:42

Agency and decisions define us. Make enough right ones and you win. Thanks for the conversation. If people want to work with you or have you make components, how should they reach you?

Hernan Ricaurte 47:17

Visit our website: ricaurteprecision.com — R-I-C-A-U-R-T-E — or email me at hernan@ricaurteprecision.com. I’d love to hear from anyone.

Sunny 47:29

Awesome. Thank you.

Hernan Ricaurte 47:29

Thank you. Appreciate it.