In the Eye of the Beholder… Transforming an Underperforming Business Jason P. Premo ADEX Machining Technologies

Discussion Topics Introduction Finding & Acquiring the Right Business Transitioning with the Owner The Critical First 90 Days Quickly Capitalizing on Hidden Wastes Lessons Shared

Introduction Jason Premo ADEX Machining Technologies Engineer to CEO, Serial Entrepreneur ADEX Machining Technologies Formerly M.C. Tool, Inc., Greer SC Roots as a “Tool & Die” Machine Shop Founded 1987 – Acquired Oct 2007 Previously 19 people, $3million sales Results in 12 Months Precision Manufacturing: Prototypes to Production for Aero, Energy, Defense Now 56 People, 24x7, $10million sales Growing Strong in Down Economy

The Search Business Plan First Create a Search Criteria Matrix Write a business plan as if you already had the company and were running it. Insert name later. Create a Search Criteria Matrix What are the Must Have’s and Would like to Have’s Industry? Processes? Niche? Size? Geography? Jealously qualify prospects against this criteria Due Diligence Examples Looked at over 34 businesses in 5 states Typical: Last 3 years sales declining, health event, no exit strategy, owner is a micro-manager, no customer relationships, no niche, no value-add

The Search

The Seller Seller as an obstacle What the Seller is Thinking Most business owners not prepared and will be obstacles to completing the transaction Building a relationship with the seller is crucial What the Seller is Thinking Before the transaction: Shall I sell my business? What is it worth? How can I find a buyer? During the transaction: How much shall I tell this guy about my business? Will he raise his offer? What terms shall I insist on? Will they fire my employees? After the transaction: Should I really have sold? I wonder if I could have got more money. I wonder how the business is getting along.

The Choice Why We Picked This Business Strengths Opportunities Strong fit against our Search Criteria “Hit it off” with seller – built trust quickly Weaknesses were really opportunities Strengths Good customer relationships and track record Beginning experience in niche processes Talented employees and skills sets Opportunities Underutilized capacity (and employee talent) Zero marketing. Huge upselling opportunities with existing customer base and expand niche capability.

Owner Transitioning Keeping Skin in the Game You aren’t as smart as you think Will take you years to turn over every rock Structuring a seller’s note not only helps with financing the deal, but ensures a smooth transition Defining Owner Role is Important Don’t expect the owner to assume a coaching role Clearly define expectations for Owner 1 year plan to introduce all sales relationships Involvement in RFQ analysis and quoting Be careful not to make owner look bad as you make process improvements and changes – Be humble!

First 90 Days Build Employee Relationships Avoid “Savior Syndrome” Employees first reaction is fear about their job Seller introduce new owners, conveys confidence One-on-one time (90% personal / 10% business) Avoid “Savior Syndrome” Don’t make big promises...Clearly communicate the vision and specific (simple) goals for the business Operational Opportunities Teach everyone about the “8 Wastes” (Lean Mfg) Sales Opportunities Spend time with customers & learn how to add value Quickly FIRE CUSTOMERS that are not a fit!

The 8 Wastes

Order Processing!

Pareto’s Law: 20% of customers account for 80% of your business Pareto Your Customers You will find that many of your customers are draining your resources and time away from taking care of your most important customers! Pareto’s Law: 20% of customers account for 80% of your business

Opportunity Summary Made Execution Our Specialty Making small promises and keeping them builds a huge amount of trust (employees & customers) Opportunities Implemented in 1 Year Shotgun approach to laser target market (Re-Brand) Quotation response from 2 weeks to 3 days Order Processing from 1 week to same day Reduced lead time to customers by 60% Leveraging employee ideas and empowering them reduced turnover from over 40% to less than 2% Firing no-fit customers made room for new customers that tripled sales on existing assets

Lessons Shared Stand on the Shoulders of Giants Form a board of advisors who will challenge you Maximize Line of Credit Early Hyper-growth can quickly strain working capital Don’t Plan on the Owner Hanging Around Tough to give up control. Seller lasted 4 of 12 months Consistency is Key with Employees Eliminate favoritism. Hold everyone to same standard Quickly deal with employees that are not on board Create a Leadership Team Enlist and empower employees, give them goals and boundaries and let them make decisions without fear

Questions?

ADEX Machining Technologies Thank You! ADEX Machining Technologies 54 Concourse Way Greer, SC 29650 Email: jason@adexmt.com Web: www.adexmt.com Mobile: 864-915-8658