Stewardship Over Ownership: How A.G. Miller’s Luigi Sposito Thinks About Building the Next Generation of Sheet Metal Fabrication

Sunny 00:00

Welcome to the podcast.

Luigi 00:03

Thanks. It’s great to be here today.

Sunny 00:05

We’re here today with Luigi of AG Miller. AG Miller is a full-service sheet metal contract manufacturer — cut, bend, weld, powder coat, paint, anything you need.

Luigi 00:17

Silk screening, plating.

Sunny 00:20

Long-run orders, short-run orders — a bunch of different ones — and you’re here in Springfield, Massachusetts, about half an hour north of Hartford.

Luigi 00:28

Yep, just slightly to the east as well.

Sunny 00:31

Well, thanks for spending some time with us. You come to sheet metal from manufacturing, but outside of sheet metal. I’d love to hear the story: how did you get into this business?

Luigi 00:41

Sure, so kind of a long story. Graduated college 1990 — kind of dating myself a little bit — but, you know, graduated with a business degree, needed a job, was in the Navy for a short period of time, was fortunate enough to get picked up by a division of Emerson Electric, and went through their training program and came to the conclusion that I really enjoy being around mechanical things, whether it’s a gearbox, a bearing. I really had a wonderful learning experience with that company and was able to progress and was always close to machinery. And whether it was some kind of a fabrication or something that was being turned, I always found it really fascinating. So, having worked for them for a number of years, a colleague and I decided to kind of branch out from the corporate world, and we purchased a small sheet metal company in upstate New York, which is still going today. And that company is called Stonewell Bodies, and we manufacture, by virtue of sheet metal, truck bodies and trailers, and we’ve been doing that almost 16 years now. But, you know, again, having an affinity for the industry, while on vacation one day at my brother-in-law’s house in South Carolina, I was with my family and was just, you know, checking out emails. Got a spam email about, “Hey, there’s this business for sale,” and clicked on the link. Two days later, I had a signed NDA, and the following week was visiting the company. Mr. Rick Miller, who was second generation at AG Miller — had an opportunity to meet with him and meet some of the staff and learn a little bit about the business — and I just, again, find the sheet metal work very fascinating, and the diversity of customers and the diversity of applications just personally kind of gratifying, right? So from there, had an opportunity to discuss it with my family. About six months later, seven months later, ended up buying the company, and have had an opportunity to work with a lot of the same employees that were here, that are legacy employees, and we continue to try to grow and innovate and invest in the business and try to solve customer problems. So I just find the work interesting. There’s, you know, a bit of the design and engineering that is fun for me. There’s also the sales and operations side of it, which I find very interesting. So it was just — the industry is kind of a natural fit for what I like, right? So had an opportunity to do this and continue with the other business and having a good time doing it.

Sunny 03:25

So going back: going from Emerson to a small sheet metal shop — quit your job right away?

Luigi 03:33

Scary as hell. Yeah.

Sunny 03:36

What were the biggest differences? Obviously there are many, but what were the biggest operating differences where maybe your intuition from Emerson didn’t serve you well, and what things were actually really valuable in taking over that business?

Luigi 03:49

Fortunately for me personally, I had an opportunity to work with some really great guys, all very supportive throughout my career. So I had a chance to see business cycles — the good, the bad — deal with people on a relatively limited basis. But the thing that struck me the most as being a partner was the amount of interaction that we would have with the actual fabricators, people that were building stuff. And, you know, sheet metal, to a certain extent, is a lot of hands-on. There’s a lot of subjectivity in some of the things that we do. So there’s always this surprise aspect of — it’s not just the machines, right? It’s really the people that operate the machines and that do the work, and the folks that inspect it and try to take out some of the subjectivity and work to a specific design. But one of my biggest surprises coming into the business was just the amount of day-to-day interaction with people of all different backgrounds, all different socioeconomic levels. And just having, you know, a decent perspective of what they go through in trying to get the product that the customer needs out the door — to our quality standards, on time, within budget. So that was an aspect that I hadn’t been exposed to quite as much. Kind of going from a little bit more of a coat-and-tie environment to, you know, getting your hands dirty and just being on the phone all the time and talking to customers — just a whole different level of learning, right? You’re right down in the weeds with people at all different levels, and not so much just looking at spreadsheets and managing from afar.

Sunny 05:40

What did that adaptation process feel like?

Luigi 05:43

You know, my background was in sales and marketing, so I’d always been around people and talked to primarily customers. So it was somewhat challenging, a little different. You know, you can’t, just as an employer, demand that something takes place and it magically takes place. You have to be empathetic with the people, and it was a bit of a learning curve. But again, I think if you come from a background where you respect people — regardless of what they do, how they were brought up, whatever the case may be — and you have that mutual respect with the people that you work with, generally it’s going to be a pretty easy transition and a successful transition. There are always going to be people that you don’t see eye to eye with, and the best thing that you can do is figure out how to adapt or find an intermediary that’s going to be, you know, happy to help and bridge that gap. So it’s really something — that interaction with people on the grassroots level was the biggest surprise for me, biggest change.

Sunny 06:48

What were the things where the discipline that you gained from your previous life helped the most?

Luigi 06:55

Budgeting, spending, trying to do as much analysis — data analysis — as possible. Those are all things that were, you know, really kind of ingrained in us. But it’s different, right? So when you’re in a small shop, you’re only going to collect so much data. You’re only going to be able to glean so much from your efficiency, or what you thought you could get done versus what you actually got done, and try to measure that. So, you know, I think one of the beautiful things about the reason we’re here together and talking about Fulcrum is trying to bridge that gap and create that data analysis, that data set, which for a lot of small shops doesn’t exist. So finding out what you can measure, and measuring it, and then finding out what’s important to you and to your business, and figuring out a way to measure it is really important. You know, along with the measurement is knowing your numbers — the financials. Again, when you work for a big company, you have an idea of what the financials are. You have an idea of your revenue, your bookings, your operating profit. It’s all published, right? So smaller companies — just making sure that you understand where you are financially, and having someone, if it’s not you personally, who is very strong on the financial side of stuff. Could just be a basic bookkeeper, an accountant — somebody that you trust. That trust factor is really, really important.

Sunny 08:18

So gathering that information, compiling and analyzing it is a challenge, but it’s also a challenge of consumption — to get people to look at it and use it and make decisions from it. How do you handle that? How do you take a culture that doesn’t consume data and get it to consume data?

Luigi 08:37

Gradually. I find that the more we try to rush or quickly incorporate new things — you know, in some cultures that might be fine and it’s accepted, and some other cultures, like the cultures that I work in, it takes a little bit more time and energy and patience, because, you know, we don’t have a lot of time to waste. So if something is working and you want to interject a new system, a new process, the biggest question is, why am I doing this? And what’s going to be the tangible output of this new process? And so for a lot of folks, they won’t see it. Even though you try to explain it and you try to quantify it, they won’t see it. So trying to get people to understand the change process and the ultimate goal for that process — it’s a full-time selling job. You can’t just create an edict and it happens. I mean, I’m sure in some industries, some businesses can. In a smaller, you know, more of a family shop, it’s a little bit harder. So it takes some time, takes some coaching, takes, you know, a general commitment from the owner, from the management, to want to implement that change and make it happen. It’s usually pretty good, right? But, you know, owners, managers, at times, make mistakes, and if you listen to the people on the shop floor as you’re trying to deploy something, generally there’s going to be some good outcomes, because you don’t know everything. You don’t know everything that you thought you knew. So I would say that taking time and deploying some new technology, and getting buy-in at the very beginning, is really important. It’s very important to make that happen.

Sunny 10:21

One of my first bosses told me, you can’t push a rope. You gotta bring people along. But at what point do you have to make the call that says you’ve invested enough time in somebody, and if you’re going to make a change happen, it might not happen with them — even if they’ve been there for a long time?

Luigi 10:37

You know, I think that is very much a case-by-case situation, right? So valuing the ultimate goal and the value of the strategy versus an individual — I think only an operator can determine when it’s time to cut bait. But there certainly are instances when you can’t get buy-in — even though you thought you had buy-in — and someone is just kind of stringing the process along. Very much case by case. But I had to do that. And, you know, in retrospect, was it a good decision? I think it was, you know, in the long term. But again, you know, we’re very much task-oriented. We’ve got to get X out the door to get X revenue in. And that kind of goes back to the patience and trying to figure out: Is the person savable? Did I do enough training? Did I generate the value proposition so that they had an opportunity to really buy in? But ultimately, if somebody’s really counter-culture, you gotta kind of suck up the good with the bad — and that bad may be short-term loss of data, short-term loss of know-how, short-term loss of camaraderie in the shop with other people — things that you can’t quantify. So, yeah, you know, again, coming from a big-company culture where you think that people are replaceable — doesn’t work in a small business, because no one’s really super replaceable. Everyone’s got some amount of tribal knowledge that you have to try to keep within the tribe. Otherwise, it’s a real pain.

Sunny 12:14

So you go through the pain and toil of figuring out how to scale a business, and then 16 years later — or 15 years later, however long — you decided to buy another one. You said it happened in a really short amount of time. Was it the right time for you? Were you already thinking about it? Was it at a point where this other business was kind of figured out, if you will, and fixed and refurbished, or however you want to describe it? So are you talking about — about AG Miller, about buying AG Miller?

Luigi 12:44

Well, AG Miller started in 1914, right? So it had been around — and continues to be around — for a very long period of time. Had some very mature clients, some up-and-coming clients that were of great interest. So, you know, is the timing right? I guess it depends on if you’re in it for the long haul or not. If you’re trying to flip something, then timing is really, really important. If, in the case of this business, there are legacy customers who are, first and foremost, great people — people that you want to hang around with, people that will give you every opportunity to be successful — you look at that customer base, and you have to value it as kind of the impetus for making the switch, right? Buying another company. In the case of AG Miller, that customer base was there. So I looked at it as, hey, you know, some of the stuff, some of the building aspects, may be a little old, but it’s a business with great bones. So, you know, if we could kind of flesh it in a little bit more and grow it — that customer base exists. I’ll tell you this, and I’ve told my family this, I’ve told friends this: buying a business is easy, right? A lot of people can buy a business. Trying to operate it, trying to grow it, trying to nurture it — especially in the first year — is really hard. It’s tough, especially when there’s not a lot of data to be shared, right? So it’s hard.

Sunny 14:15

One of the hard parts, though, of buying a business is valuing it. Oftentimes there’s a gap between what, you know, someone who — like you said, a second-, third-generation business owner — you can have a value of a business that might not actually be rational from a financial perspective. Did you have that difficulty? Was there a tough value conversation?

Luigi 14:37

Yes. So in my life, I’ve had an opportunity to be in and around the acquisition of three companies. One very, very big — that was not mine; I was part of the deal. One that was relatively small — which was when my business partner and I decided to buy Stonewell Bodies. And then this one, as well as one other company that we had made offers for but never acquired. So, yeah, the valuation is kind of tough, right? Because obviously we can value the real estate. We can value the equipment. To a certain extent, you can value the consistency of the profit stream that it generates. But if you’re buying from a family member or a sole proprietor, there’s a lot of emotion that goes into it — “look at all the hard work that I’ve put into this,” you know. But at the end of the day, whether it’s an earnings multiple or an asset buy, you’re only going to get so much for that goodwill, that intangible. So fortunately, in my case, I think we were able to paint a picture with the current owner of how we came up with the valuation, and we were very close to begin with. So, you know, no surprises. I don’t feel like I overpaid, and I don’t think he feels like he undersold. So there’s a human element when you’re trying to do a transaction of small business, right? I think that if the prior owner, Rick Miller, and I didn’t like each other as people, I would have never bought the business. I don’t think he would have sold it to me. So there’s this whole human element in the business transaction — same with the staff. So when the LOI was signed, and we’re talking about the transitional period, I had an opportunity to come in and meet with, you know, some of the top managers. And I think if the vibe wasn’t right, I would have probably walked away. And I think the same for Rick. I think if Rick had sensed that there wasn’t good chemistry between me — the potential new owner — and the existing people, who he absolutely loved and treated as family, if that just wasn’t right, and my mindset was, you know, “I’m going to come in and clean house,” I think Rick, being very loyal to his team, would not have sold the company to me as well. So, yeah, there’s a lot of non-quantifiable evaluation that goes on in the transaction — especially leading up to the LOI phase and right up until closing. So, you know, we had great chemistry with the people that were here. Some have since retired, and I’ve had to backfill. So, again, it kind of boils down to: trying to operate a small business — it’s about the people. It’s about the guys that are running it.

Sunny 17:27

So just to clarify, an LOI is a letter of intent.

Luigi 17:29

Yes.

Sunny 17:30

When you issue one, is it binding? Is it essentially the same as actually getting an offer? For a lot of people, they’ve never received one and don’t know how to think about it. As a party that wrote one and gave it to somebody, how did you feel at that point in the transaction?

Luigi 17:48

Well, again, I wrote it with a great deal of sincerity, saying that, you know, I have every intent to follow through with this transaction based on what I’ve spelled out in this letter of intent — price, terms, and the ability to close it. So again, the letter of intent is really just that. If you’re sincere in it, you intend to continue down the path of a due diligence process, which should lead you to a conclusion. And if all of the — let’s call it the pre-due-diligence, the selling data that’s been presented that you should have requested — if none of that is really found to be contrary to what you had expected, then you should be able to close on the agreement.

Sunny 18:39

So are there other things that you would have seen that would have caused you to walk away?

Luigi 18:43

Obviously, there’s the unknown of the environmental in a manufacturing shop — that’s always, you know, present. Whether I’m going to do a Phase I environmental — we had to do a Phase II at this place, simply because of its proximity to a facility that does a lot of industrial coatings. There were some actions that the prior owner had to take, which at any point in time could have killed the deal. Because, obviously, if we don’t get a clean bill of health from the EPA — anytime there’s bank financing involved, or SBA financing — those things will trip up a deal, regardless of how badly the buyer and the seller want to close the deal. So I think you had asked me about the letter of intent, and having issued a couple of them, it goes back to that relationship between the seller and the buyer and the sincerity involved in the creation of the LOI. And that, should nothing come up in due diligence, you should be able to close that deal.

Sunny 19:45

After you buy the business, is there some point in time it feels like yours? Is it like a Ship of Theseus, where it maintains its own identity? Is it still the same as it was before? How does that feel from your perspective?

Luigi 19:59

So, I think that in long-term, long-lived businesses like these, we’re just stewards of them, right? So obviously we have the ability to resell it, close it — to do all the things that you would think you’re entitled to do — but at the end of the day, when you have a customer base that relies on you — I mean, what does the term “owner” really mean, right? Like, okay, you can do things that you may think are irrational, but at the end of the day, we are stewards of these businesses. If we’re going to, you know, at some point in time, retire from them, hand them down to our family members, our children, sell them — there’s a point in time where I think you feel comfortable in it, but the sense — and I’m speaking just for myself — the sense of ownership? No, not really. Like, I know I own a boat, I own a car, right? I’m cool with that. But the fact that someone would introduce me to an employee or to a customer as the owner — I look at myself as the chief sales guy, right? So, no, I don’t feel like — again, speaking for me only — that there’s ever going to be a day where I’m like, “I own this place, and because I own it, things should be great,” or “things should be done this way.” You know, I just — I don’t know. Maybe I just don’t have a big enough ego to ever say that ownership really means anything other than you’ve got some debt, you’ve got some customers you gotta take care of. We’ve got vendors that we have to take care of. You know, having a great vendor base is a luxury. So, no, the term ownership doesn’t really mean much to me personally. It’s more stewardship — that’s important to me.

Sunny 21:53

Not to bring you into a tech-world beef, but there are two schools of thought in our world: our school of thought, which is, we’re writing software to support businesses like yours; and another school of thought, which is, “You guys don’t know what you’re doing, and all these tech companies are going to get a bunch of investment, build their own machine shops, their own sheet metal fabricators, write their own software.” And you said something interesting earlier — that there’s always some tribal knowledge that actually is extremely important to servicing these long-term relationships. These products are really important, whether that’s things that support our energy grid or support our safety as a country, or support other infrastructure, or even just fun recreational things. How do you think about that, having both the perspective of being an outsider looking in and also being an insider operating a business? Do you think that there’s something special about an entity like AG Miller and your ability to build stuff and know how to do certain things? Or do you think that technology can usurp that as well?

Luigi 23:01

So that’s a really interesting question, okay? Because I think I can answer it in a couple different ways. As it relates to the tribal knowledge aspect, providing a part that your customer is going to accept becomes a function of relationships and understanding what that customer’s true intent is when they receive that product. So they may call out something on a drawing that is somewhat ambiguous, but you’ve built it for them for years, so you know that it’s going to work. And guess what? For years, that part has been accepted unconditionally. No issue. So we’re at an inflection point with some younger people coming into these industries — younger engineers, younger quality folks — and the part doesn’t meet the print. It just doesn’t meet the print. But we know that it’s always worked, it’s always fit, it’s always been unquestioned. So part of that tribal knowledge has to be balanced with — in these days — does it meet the print? And I think our ability to satisfy the customer’s needs and satisfy the documents that are given to us that pertain to the form-fit of that part — they have to all come into play. Because the guy that let that part, at some point in time, for 20 years always work — the next day, when his replacement or her replacement comes in, it may not meet the print. Therefore all that tribal knowledge and all that legacy acceptance goes out the window. Yeah, so now we have to talk about technology, and are we able to manufacture the part to that print in a cost-effective way?

Sunny 24:57

Or should you? Maybe that print needed to change and it didn’t.

Luigi 25:02

Excellent point. Yeah. And again, that goes back to having the relationship with your customer that says, “Look, if I build it exactly the way it’s drawn, it may not work. So should we have a conversation and talk about updating the drawing? Are you open to doing that? Or — this is my position as the manufacturer — this is what I can and can’t do as it relates to that drawing.” So it comes back to having a conversation with your customer, and to a certain extent, even the operators that are building those components, to say, “Hey, look, we’ve always done it this way. We can’t do it this way anymore.” And having acceptance and having the right equipment and the machinery to do that. So some of your question can also be answered by: what is the quantity we’re talking about? You know, if it’s one or two items that we have to manufacture, I might be tooled for it and make it happen. It’s not a big deal. Now, if I have to manufacture 5,000, 10,000 — my quantities really ramp up — and we don’t really hit the print, then all of that relationship, all of that tribal knowledge, is going to go out the window, because you’re being judged based on the item vis-à-vis the print. So, yeah, there’s a lot of technology that we can bring into small businesses once we get past the hurdle of the relationship and that tribal knowledge — “this is the way we’ve always done it.”

Sunny 26:32

In the industry right now, it’s a little bit like a camel hump, right? It’s bimodal — there’s a new generation that’s coming in, interested in working, and then there’s an older generation kind of on their way out, but there’s very little bridging that in the middle. How do you solve that? How do you transfer that knowledge effectively, without having to basically restart every relationship and resolve everything over and over again?

Luigi 26:53

Documentation. I think documentation.

Sunny 26:58

People don’t like writing stuff down.

Luigi 27:00

No, it doesn’t have to be written down. It just has to be preserved, right?

Sunny 27:04

What do you mean by that?

Luigi 27:06

So, for example, one of the biggest reasons we wanted to partner up with you guys — Fulcrum — was that there was a great method for capturing data, and that capturing technique can be as simple as scanning in a document that has some handwritten notes on it. It could be as simple as taking pictures and scanning in things. Creating bills of material that are, maybe from a legacy perspective, never really properly documented — but just having that ability to capture what we purchased, making it part of that bill of material — that kind of helps bridge the gap of first generation to second generation, and what happens in between, right, in that gap period of time. So data collection, I think, is very, very important. Simple things like knowing where items are purchased — like, did I buy it from McMaster? Did I buy it from MSC? Did I have a local shop make this for me? So capturing the data that would have historically been considered tribal knowledge, in my mind, is imperative.

Sunny 28:19

You need someone that has a kind of hybrid set of skills to make sure it’s done right and to enforce it. You need someone who’s mechanically minded enough to even know that this makes sense, someone who’s diligent enough — a little bit, I don’t know, OCD about things — to make sure that things are organized correctly, and someone who understands that relational part of it, that relationship with the customer, to decipher: Is this really right, or is it just, like you said earlier, to the print, or is it really what we need to do? Yeah — who is that?

Luigi 28:48

That’s a really great question, because, you know, I don’t know if the term — I’m trying to think of a way to say it diplomatically, okay — but there’s always one guy in the shop that knows everything. And, you know, some people use the term “shop rat” or whatever the case may be, right? But there’s always that one person that has a handle on things, because they’ve done it, they’ve experienced it, they’ve been part of this development with the customer, or with a vendor — whatever the case may be. So there’s always that one person. And that, in my mind, for small companies, is probably one of the biggest Achilles’ heels — having that one individual who knows everything, yet nothing is documented.

Sunny 29:37

Sometimes that person doesn’t want to relinquish that kind of ownership over the information, right?

Luigi 29:42

So — personally experienced that. Been there, done that. It’s very difficult, and you can only, as a small business owner, I think, tolerate so much of that before what you would consider to be mission-critical information is not shared. And at that point in time, you know, that comes back to that hard question of: is this one individual worth the bother?

Sunny 30:09

Well, sometimes they’re so mission-critical, it’s not just a short-term little dip that you have to weather through. It could be business-ending sometimes, right?

Luigi 30:17

Yeah, it absolutely can be. It’s, again, one of those case-by-case scenarios where I think the management team has to determine: am I willing to put the time and energy and effort into trying to extract the information from one individual, versus just starting from scratch and recreating drawings and, you know, spending the time and money working with a different engineer, a different vendor, a different purchasing person, and being able to document that data? I think that, my personal opinion is, that has value. So succession planning — we’re talking about passing it down to a family member, selling the business, being acquired by somebody — it all has value, because that’s the know-how that drives efficiency within the business that ultimately leads to either profitability or at least taking care of customers’ needs. Driving home the need for data collection, as we were talking earlier, from receiving all the way through production — I look at it even in its more infantile stage, which is purchasing, and being able to drive purchasing to material showing up, to receiving, and starting the data collection at that point. And I think that’s where I personally need to get better and drive the need for this data acquisition in AG Miller, so that things that we do become repeatable, become automatic. So we’re not looking for nuts and bolts and fasteners and, you know, that 50-cent PEM that’s going to slow down a job. And that, I think, is part of extracting the data from the generation that was before us — and doing it in such a way that’s not threatening, because that’s not our intent. It’s never my intent, anyways, to, you know, try to threaten someone with a “give me all your information so I can replace you.” I don’t think that’s the ethical way to do things. I don’t think it’s the right way to do things.

Sunny 32:27

So embedded in this are kind of two opposing things, right? Do you have a framework in your mind about when — how do you decide when to really understand how it was done before and repeat it, versus when to come up with a new solution from scratch, because the old way might not be the right way? Both are true sometimes, right? Sometimes it really is shooting yourself in the foot if you try to, you know, fix something — you reinvent the wheel that doesn’t need reinventing. But other times, people can go down the other path where things need to change, but they’re stuck in their old ways as well.

Luigi 33:02

Well, I think to a certain extent, you need to have a strategy. You need to have a goal in mind. You need to have an end point that you want to navigate to — that could be on-time delivery, that could be revenue, it could be operating margin. And then from there, you kind of have to work backwards to determine, well, can I get there with this wheel, or do I need a different wheel, right? And I think as a business leader, you have to have a strategy in place, and it becomes really, really difficult to execute that strategy when you can’t communicate the strategy, you can’t afford to execute that strategy, and when you don’t have the right customer base to get there. So I think, to answer your question directly, the value of the wheel — or the suitability of that wheel — becomes a function of my end game. Where do I want to get?

Sunny 33:59

Which, in and of itself, is a preference. It’s a choice. A different person buying AG Miller may come up with a very different strategy based on what they want and what they see and what they understand — and a lot of people mix up strategy and plan, and they’re very different. But how do you make sure that the decisions and the preferences you have on the strategy you’re choosing are the right ones?

Luigi 34:21

That’s a good question. Part of, I think, validating the strategy — validating where you’re trying to go — has to be part of either a very strong leader who is happy to, in a very dictatorial way, point out all the different tactics and steps we’re going to take to get there — which may work for somebody. An Elon Musk, for example — never met the guy — but he seems to have that persona, that way of doing things, and Lord only knows it’s worked for him. It would never work for me. I think part of that has to play in with who you are as a person, your ideology of how to run a business, your beliefs, and how to get a team motivated to fundamentally attack the strategy — the end goal. So I don’t think it’s a one-size-fits-all answer. I can only say that from my perspective, “management by communism” — that’s how it was said that I manage. I manage by communism, and I don’t think of it that way. I think of it as managing by teamwork. If we all agree we’re going to be able to effectively get to this point, let’s figure out collectively our roles, our responsibilities. Each one of us has our own mission, and you’re going to do your job to the best of your ability to get to the goal that we have collectively agreed that we’re going to get to. And if at some point in time you don’t feel like you want to continue to do that, that’s okay. We’ll have a conversation about where you fit in and how we’re going to collectively do this. Or, again, it gets to the point where we’re not really working as a team. So we have to be like the NFL, right? Make some trades, put some people out there on free agency, and kind of evolve to this group of people that believe in the end game and the tactics that we’re going to use to get there.

Sunny 36:17

I mean, I think that’s an important distinction: collectivism, not communism, right? It’s really dangerous, though. One of the first lessons that I learned in managing people — or leading — and a lot of people that I know are learning, or have learned, is that managing by consensus is extremely dangerous and never works. And when you first take charge of something, fear, failure — whatever the motivation is — can almost always end up expressing itself as trying to seek consensus. How do you make sure that you’re behaving collectivistically — which is very important, making sure everyone’s brought along — versus trying to seek consensus? Because it can look like the same thing.

Luigi 37:00

That’s really hard, right? That’s really hard. And trying to gain consensus — you have to be able to see through the folks that are just going to say, “Yes, I agree,” but at the end of the day, their actions don’t support their agreement. So trying to get there by consensus is never going to work. It’s tricky. So at the end of the day, I think you have to look at each individual person that you’re working with and ask the question: Are you working? Are your actions supporting all the head-nodding that you did in our meetings when we were talking about strategy — and, to a certain extent, tactics? Because fundamentally, if people aren’t really holding up their end of the bargain and doing what they said they were going to do, then you have to, very constructively in my mind, lead. Get people to change their behavior, get them to maybe understand what you were trying to convey, and get them to participate in that of their own right — their real buy-in. And if you can’t get there, then it doesn’t matter how much you love the people you’re working with. If you personally are bought into that, you might have to make a change or reassign somebody to a different task that they’re more comfortable doing.

Sunny 38:24

Do you think that skill is nature or nurture — being able to not seek approval?

Luigi 38:29

I think it’s gotta be part of your nature. It’s gotta be part of your nature, and then you have to continually nurture that.

Sunny 38:37

When you select leaders or promote people or look for new managers from the outside, are you looking for that trait?

Luigi 38:45

Which trait specifically?

Sunny 38:47

The ability to not seek consensus, to not seek approval. Or are there other things that are more important?

Luigi 38:54

I guess I’m going to look at it this way: in a small company, right, whose approval are you seeking? Right? If you’re seeking the approval of the person that you report to and that ultimately reports up to the owner of the company, or the chairman, the president of the company, then that would be fine, because, you know, ultimately I would assume that you’re trying to all get to that end game — the execution of that strategy. So, going back to recruiting and hiring, you know, I look for people that — if I feel that they are, first and foremost, a wonderful human being, somebody that is going to be supportive of their colleagues, their boss, third-shift janitor — doesn’t really matter who that person is — if they’re supportive of these other individuals and they’re good people, a lot of skill sets we can coach, we can train. If we’re starting with an individual who may be really, really talented but isn’t going to fit, then, man, you’ve got to really make a decision on how bad you need that technical skill versus the cohesiveness in the team. And, you know, maybe with that individual, you have a very open conversation with them — you’re like, “Dude, you’re going to be great at your job, but I don’t know if you’re going to fit,” right? So now we have to have a different conversation about the value of this individual in the organization. You know, I will be the first to say that I suck at hiring people. I just — you know, I look at people sometime, and I think that they’re going to do a great job. And they’ve sold me on their skill set, and they’ve sold me on their teamwork and their work ethic, and I got sold a bill of goods. And I think that there are people that do a very, very good job in hiring, and I’m just not one of those people, so I have to rely on other people to help me make a decision. And part of being successful in business is knowing your weaknesses — like, I know I don’t do a really good job in hiring. I try to hire fast, and sometimes that’ll bite me, and sometimes I let people stay in position too long — so I fire slow — and that’s not good either. But I’ve learned, right? I’ve learned to spot things and just kind of plot this trajectory in my head: Is this person going to work out? Was I sold a bill of goods? So I’ve gotten better at firing fast.

Sunny 41:34

What’s the emotion that prevents you from firing faster? Is it optimism? Is it something else entirely?

Luigi 41:40

So, you know, that’s a great question. And I remember when I was a young manager for that other company — the big one — and we had to do layoffs. And I will tell you, I was distraught. I was distraught at the thought of sending a guy home or a girl home who has three kids, a wife, a mortgage, a truck payment, and I was going to be ending their employment with us. I was physically ill over that. And I guess as I’ve matured and come to understand it, there are certain priorities that you have to set for the business. First and foremost is you have to make money so that you can take care of everybody else, yeah. But as a younger person, you know, it just wasn’t as obvious to me. So that was one of the things — emotions — that prevented me from firing fast: worrying about a person’s state and trying to keep them aboard and keep them along, and hopefully — this optimism, pardon me — that they will come along, when it’s just the wrong thing to do. So I think for people that are very social, like myself, it’s a hard thing to do — to fire fast — because part of it is a reflection of your ability to hire, right? So you just brought this person on; now you’re going to fire them. Well, geez, you made a really bad decision in hiring. Should have made a better decision, done more upfront research, done more screening, asked more questions. So I think that’s part of it. And I’m speaking of myself, and I could probably say that some other managers, other business owners, will fall into that same trap — of trying to be a good person and having a slightly out-of-balance perspective of the bigger picture for the business.

Sunny 43:41

How do you think about transferring these types of learnings to the next generation? You’re part of that hump too, right? You’ve got a lot of stuff that you’ve gathered over all these years. How do you think about transferring that knowledge to somebody else, you know?

Luigi 43:52

So I look at it that it shouldn’t be a data dump. It should be a constant trickle — talking to people about, you know, whether it’s a customer; talking to them about efficiency; talking to them about trends in industry and why things may need to change. So, you know, if you look at me as one of those guys that are in that age group where information will need to be transferred soon, I like to think that I’m memorializing data in our systems so that the data is available, and that transfer of knowledge can be more direct. It can be more efficient. And, you know, my perspective is that if I were to get hit by a bus, somebody else could come in and take care of the business vis-à-vis what I’ve left in records. The relationship part’s always tough, right? But if you’ve got a strong number two, number three, strong cadre, your need to transition data at a very rapid pace should never exist. You know, there should always be systems. There should always be people that are able to transition and take the business forward.

Sunny 45:23

We have this, I don’t know, framework internally, where we talk about how, over the last 30 years, we’ve done a lot of work as a civilization improving the mechanical muscles of manufacturing — these — what, you have an eight-kilowatt laser out there, or something like that?

Luigi 45:39

It’s a six-kilowatt that I purchased with the company.

Sunny 45:43

It probably spits out parts 10–15 times faster than a 50-watt laser that was probably standard 15 years ago, right? And now the bottleneck is mechanical mind: decision-making, planning, organization. How do you think about that? Do you think that that’s going to be easier, harder? Do you think that that’s already been happening? Do you think we’re lagging behind? There’s a huge push to reshore manufacturing. We’re trying to assist it with tariffs. We have demand for data centers and for nuclear fusion and all these different things that actually require a lot of sheet metal fabrication, and we’re bottlenecked, and we can’t fulfill it locally. I know that’s a really vague and kind of sprawling question, but what are your thoughts on all that?

Luigi 46:27

So you started your question — you pointed out a very specific machine, right? And I think that our ability to create stopgaps in human capacity, capability, in human availability, in human training, is all starting to take place, and has started to take place for the last 10 years. So, you know, if we look at just our ability to automate the bending of metal, and the programming of robots to bend metal, the programming of robots to weld metal, to do sanding — to do so much of what we considered to be at one point in time incredibly costly — the rate at which prices are falling for some of this equipment makes the process of automation a possibility for small shops like us. Like, we have a robotic welder, right? Do we use it to its fullest? No, we do not.

Sunny 47:30

But you’re saying that 10 years ago, you couldn’t even afford one.

Luigi 47:34

Couldn’t afford it; couldn’t come up with a concept or a case of why, you know, a 35-person shop would ever have a robotic welder, because it was not fathomable that you could spend so little money to have that much capability and flexibility. So as people in the sheet metal industry — like the big companies, like the Amadas of the world — continue to evolve and make product that helps us, it really is, in my mind, a stopgap for lack of human resources — people that are just going to come in and do this work and do it as efficiently and not take a day off and not miss work because of, you know, some social reason. So I think that as the industry continues to evolve, and the quality of what’s being produced to assist sheet metal manufacturers continues to evolve and become affordable, there’s going to be a huge change in what these businesses look like, and it’ll probably happen in less than the next 10 years.

Sunny 48:51

Within your career?

Luigi 48:54

It’s going to be a tough one to answer, because, you know, I’m 57. If I stayed to full Social Security — 67…

Sunny 49:07

Could be older in the future.

Luigi 49:08

Could be older in the future. In the next 10 years, like, yeah — I’ve put in some systems and some equipment that can be run by people who don’t have 20 years of sheet metal fabrication experience, and, you know, we can adjust our bend radiuses and come up with parts that are pretty damn good — and you’re on the job, you know, two days. So the sophistication of what we are buying today is way different than even 10 years ago, and the sophistication of what we purchased 10 years ago.

Sunny 49:44

Do you think of that as more of an opportunity — that more people can participate in this type of work — or do you see that as potentially dangerous and commoditization, in that there’s less differentiation when many, many more people of less sophistication could go buy this machine and produce the same kind of parts?

Luigi 50:07

So I think what it could do—

Sunny 50:09

That’s a false dichotomy. It could be some other reason too, or some other outcome.

Luigi 50:12

Well, I think that OEMs could very easily invest in equipment to make parts for themselves that they never could rationalize investing in before. So I think that the risk of work coming in-house is very real. I think that vertical integration could be very real for a lot of the people that we currently serve — a lot of the industries we serve. I think it’s very real. I mean, you know, somebody doesn’t want to get involved in welding, right? Because they don’t want to find welders. They don’t have the certifications. Young people don’t want to become welders. So there’s a scarcity — yet Company X requires welding, and they’re just not getting what they need in the open market. So they’re going to insource. They’re going to buy a couple robots. They’re going to make a relatively small investment — maybe one or two people to manage these robots, to program them, to take care of them, to change wire, to fix them when a wire gets stuck in a MIG welder, you know. So I think that as technology improves, there is the possibility that we see less hands in shops like AG Miller. I think it’s real.

Sunny 51:36

What haven’t we covered? We’ve bounced around all over the place. What other thoughts—

Luigi 51:39

We haven’t talked enough about your product.

Sunny 51:42

Well, this is about you, but happy to answer any questions that you might have.

Luigi 51:45

No, so — you asked the question. And I think what brought us together was the technology available in software to help small shops become a lot more organized. I don’t want to say systems-driven, because I don’t think that, you know, 35 people really need tons of systems to drive them, but the organization — the quality of the data that we can extract — has become a lot more affordable.

Sunny 52:14

What we see is a few things that occurred that are somewhat disconnected, but kind of connected. The first is that, very measurably, the dollars per employee in a manufacturer — CNC shop, sheet metal fabricator — has gone up by about 8x over the last 30 years. You would have been a really well-functioning shop if you hit $90,000–$100,000 of revenue per employee back in 1989, 1990. Now we see shops that are really well automated — doing even short-run work — at $300,000–$400,000 of revenue per employee. And there are ones that, you know, have that capacity — maybe they don’t have that work right now. And one thing that we realized accidentally, without really predicting it, is that that’s a good thing, but it’s also really difficult. Each human is now in charge of that much more information. They’re just doing so much more. It used to be that you would turn a punch and press-brake one part over and over again for three weeks on end. Now you’re working on 6, 7, 8, 9, 10, 20 jobs in a week, potentially.

Luigi 53:18

Oh, absolutely.

Sunny 53:19

And so we found that there’s some breaking point where the humans — even if we can automate the machines more — they just can’t hold all that information in their head. And the community of humans can’t do that either. We also see there’s a huge need for these types of systems, but there’s a ton of companies that have started — really smart, Stanford grads, worked at Google or NASA or whatever it may be — and try to write software for manufacturers, and they fail, mostly because there’s actually a huge amount of information that’s really valuable on your shop floor. We also see some companies that build software for themselves and have a hard time commercializing it because they don’t really understand technology. They understand their shops, and they can say, “This is what we need,” but they don’t really even understand what’s possible with software, and so they don’t design the right thing, or it’s not scalable. So for us, one of the biggest secrets is having people that are technologists, but with the humility to say, “We are not manufacturers, and there’s something really important going on here,” and to come on site and extract as much information as possible and have it guide us — not to build what our customers say “build this” — that almost never works — but to really start with what you’re trying to achieve and work backwards. Really long-winded, but: what advice would you have for companies like ours that are trying to take people that are really smart technologists but existentially need to learn about how you do business? What’s advice for us to work with you guys better to extract the right gems from these conversations and experiences?

Luigi 54:54

Understand the pain points. Really understand what is difficult for small manufacturers — whether it be production planning, whether it be procurement, whether it be development of routers — and try to work with us in such a way that you give us visibility into solutions for questions we may not even be able to ask at a certain point. So if you just break down what we do and how we do it, and — having a different skill set, a different level of tech savvy and understanding of what is possible with coding and with software — bring us solutions to stuff that we haven’t even thought about yet, and work with us to ferret out what may be a better solution to tribal practices. You guys are so outside of my league from a tech-savvy perspective that it’s embarrassing for me to try to tell you what you should be doing next. Do the things that are basic: listen to your customers, try to get ahead of them with technology, try to create solutions that can be adopted — that are adoptable — and try to do it all at a fairly cost-effective scale, so that it’s affordable. And I think that you guys are doing those things — otherwise we wouldn’t be having this conversation, because I couldn’t afford it. And then have that one guy or girl or person who is willing to listen to us when we get jammed up, and try to come up with some solutions — whether it be a bug or just a process improvement. So basically what I’m telling you is: just keep doing what I think Fulcrum is doing right now. I think you guys are doing a great job. And be present — you know, like, we’re going to have a chance to chat tonight, right? And you may ask me a question that I hadn’t even thought of, because you have the ability to talk to so many of us that I don’t have the ability to really aggregate all these pain points and come up with these themes and provide specific solutions that, you know, we’re going to want to spend our hard-earned dollars on to make us better. Because fundamentally, all you’re trying to do is make us better, right? So, I mean, could we run this business without software? Absolutely we could. We really could do it. And for many, many years, this company was very successful doing it without, you know, state-of-the-art software. So to a certain extent, you know, we don’t know the questions to even ask ourselves at times, but you guys are really good at coming together with a bunch of different manufacturers and coming up with these themes and the solutions to problems that we otherwise wouldn’t really have a good way to solve. So, yeah — keep doing what you’re doing.

Sunny 58:08

Thank you. Appreciate that, and I appreciate you spending time with me and sharing your story.

Luigi 58:12

It’s fun.

Sunny 58:13

If people want to ask you questions, want to give you work, how do they get ahold of you?

Luigi 58:18

So my email is Luigi — that’s L-O-U — @agmiller.com. I would love to hear from other shop owners. Would love to get some more work. You can also feel free to send me a text: 607-279-2138. I’m happy to text, call, chat. I don’t have all the answers, but I’d love to talk to more people in my situation that are still trying to grow their businesses and, you know, do a good job for their employees and their customers.

Sunny 58:53

Thank you. Appreciate it.

Luigi 58:54

Yeah, thanks. It’s been a pleasure. I really appreciate it.