Tips to Recession-Proof Your Manufacturing Business

Episode 210 | Challenges: Leadership Community Workforce

Tips to Recession-Proof Your Manufacturing Business

Is it possible to recession-proof a business? With all the chatter in the economic world about the potential of 

a recession, how do you mitigate your losses? Are their things that you can do up-front that would help you 

survive a recession? Jim and Jason discuss the ‘dirty word’ in the industry and some steps you can consider implementing before—or when—a recession hits.

 

Connect with us:www.MakingChips.com/contact

 

Why are so many NOT worried about a recession? 

Many young people in the industry who dove into the workforce after 2008 don’t understand what it means to be in a recession. They haven’t lived through one. Those who remember what it felt like hate to talk or think about it. Jim points out that despite the emotion surrounding the word, it needs to be brought back into the vocabulary. Just because you avoid something doesn’t mean it won’t still happen. Jason and Jim emphasize that if you are educated and prepared a recession won’t impact you as much as it could. So what do you do?

 

If a recession IS coming, what do you do?

Jim notes that every recession he’s lived through “looks and feels a little bit different than the one before.'' The unfortunate reality is that we don’t know when a recession will come, how bad it will be, or how long it will last. When Jason’s Dad, Steve, led his business through a recession—he stopped taking a paycheck for a chunk of time.

If you’re a business owner, you will have to take some hits. It’s inevitable.

Jason’s dad knew he had to protect his business and employees, so he stopped paying himself to get them through the economic downturn. One way to mitigate the harshness of this reality in your own life is to build up a nest-egg. Create a savings account in case of a recession that can see you, your family, and your business through to the other side. 

 

Labor is the #1 biggest cost in the manufacturing industry

If cutting your pay isn’t enough to mitigate the financial losses, you have to address the elephant in the room: you might have to let someone go. It’s not easy to do, but sometimes it has to be done. It comes with the territory of being a business owner. It may come down to, “Who can we afford to lose?”. 

Sometimes, there is a clear path. Steve Zenger had to ‘trim the fat’ in the last recession and fire a few people who were under-performing or unwilling to help them make it through the recession. If you’re not at the point where you need to make some layoffs, a tip to save some money is to reduce overtime. If you can’t afford to pay your team, you certainly can’t afford to pay time-and-a-half. 

 

Reduce your overhead costs and develop sales skills

Jason currently pays rent on three different locations for his business. He questions if a recession hits, could he consolidate locations to reduce overhead? Another option the guys point out is relocating the business somewhere with lower rent. 

During the last recession, Jason’s Dad took him out for lunch, and point-blank asked: “What are you going to do about this?”. Jason wasn’t going to sit back and cry. Instead, he developed a passion for sales. If business wasn’t finding him, he was going to do everything possible to bring it in. 

A recession is difficult to talk about, but Jim and Jason agree it’s stuff you need to know. A business owner must do everything they can to prepare. To hear the rest of their suggestions regarding surviving a recession, listen to the whole episode of MakingChips!

 

Here’s The Good Stuff!

  • Recession is a dirty word in the industry
  • The potential of the electric vehicle
  • Text CHIPS to 38470 to subscribe to the Boring Bar Newsletter!
  • America’s largest truck engine manufacturer is laying off 2,000 people
  • Mitigating the risks that come with a recession
  • When it comes down to reducing your labor force
  • Jim and Jason discuss ways to lower your overhead costs
  • Don’t get used to a lifestyle of expensive living
  • Consider outsourcing work that isn’t profitable

Tools & Takeaways

Connect With MakingChips


Subscribe to Making Chips on Apple Podcasts, Google Play, Stitcher, or Spotify

Jason Zenger: Is it on the Shared Drive? Is it on the Google Drive? Is it on the Dropbox? Is it on the E drive, the C drive makes me nuts.

Jim Carr: You have no idea. I'm telling you, Jason, before we converted to ProShop ERP, it was literally we had things everywhere. It was in Word, it was in Google, it was on that drive, it was on the other drive. Right now since we converted to ProShop ERP, everything is in ProShop. It's our one source for all information.

Jason Zenger: That takes the pain away.

Jim Carr: It certainly does.

Jason Zenger: Go to proshoperp.com for more information. Bam.

Jim Carr: Welcome to MakingChips. We believe that manufacturing is challenging. But if you are connected to a community of leaders, you can elevate your skills, solve your problems, and grow your business. I'm your host, Jim Carr, and I'm joined by my cohost and good friend of 5.75 years, Jason Zenger.

Jason Zenger: Hey, Jim. Good afternoon.

Jim Carr: Good afternoon. How are you?

Jason Zenger: I'm well, thanks.

Jim Carr: Good. I don't want a recession buddy.

Jason Zenger: I know.

Jim Carr: To let everybody know what we're going to be talking about today is we're going to be talking about recession because my, gosh. It's been a while since we've felt one.

Jason Zenger: I know. I've gotten use to not having to deal with those doldrums.

Jim Carr: I know.

Jason Zenger: Every business cycle comes with its pros and cons. The cons of not being in a recession to being an expansion is, it's hard to find people. But I'll take those over the lack of sales, financial troubles, and all that stuff.

Jim Carr: Yeah. We'll get into that in just a minute. But yeah, I agree. I think that recession is a dirty word in our industry. I think it's something we need to put back in our vocabulary because quite frankly, I think there's a lot of people in our industry and people in the working world right now that really haven't felt one.

Jason Zenger: A lot of younger people out there, they don't understand what a recession is on.

Jim Carr: My son, he may have heard me talk about it in 2008. But he has never felt one. My sales manager John-

Jason Zenger: You know what could be really scary, Jim?

Jim Carr: What's that?

Jason Zenger: During one of our previous episodes, the episode with John from pastor to manufacturing leader, he talked about the $1.5 trillion student loan debt.

Jim Carr: What about it?

Jason Zenger: What about recession plus a bunch of younger people who have student loan debt getting let off because that's what happens during a recession?

Jim Carr: Well, I don't know what happens if you default on a student loan.

Jason Zenger: First of all, you can't default on a student loan, but what if they can't pay it because they don't have a job? Just some scary things to think about.

Jim Carr: What if? I don't know. I'm not in finance. I'm a manufacturing guy. But what if you owe the federal government $50 grand, and you don't have a job, and you can't pay that back? They're not forgiving at all. They don't understand.

Jason Zenger: Even if you file bankruptcy, I believe that you cannot have your student loan debt forgiven.

Jim Carr: Is that right?

Jason Zenger: Yeah, it just goes to show yikes. College tuition has gone up faster than any other expense that there is out there. College [crosstalk 00:03:22] tuition has gone up faster than all of those. I don't know if you'd call it a conspiracy theory, but I think there's a bit of political collusion with universities, the banks, the politicians, and all that stuff. It's ridiculous. There's no reason why college tuition should go up as fast as it has.

Jim Carr: Interesting. Well, stay in the industry and hopefully our next recession [crosstalk 00:03:44].

Jason Zenger: ... look for a great job in manufacturing where you don't need a university degree.

Jim Carr: You bet. Absolutely. We're going to talk about some tips and tricks that I've learned over the decades in this industry to help make some of that pain go away.

Jason Zenger: I've got a few, too.

Jim Carr: Good.

Jason Zenger: We probably got some in common.

Jim Carr: Yeah, we probably got some in common. But I look forward to talking about that in the next few minutes.

Jason Zenger: Before we go there, Jim, what's going on at Carr Machine & Tool?

Jim Carr: Well, as you know, it's not been a secret that we've had a really good year at Carr Machine in 2019. We're coming to the end. We're getting towards the end of the year, things are slowing down, and we had a huge job that we did this year. We're about 70% done with that job.

Jim Carr: Things have started to, ironically talking about recession, things have started to soften a little bit. However, we still are getting a lot of new prospects. We certainly are quoting for a lot of new people. It's good. We're trying to make sure that we look at industries that are somewhat recession-proof.

Jason Zenger: Such as what? What industries are recession-proof?

Jim Carr: Well, electric. Today you told me that you put money down on a Tesla, right?

Jason Zenger: I did. I have a Tesla Model 3 I'm going to start driving, which it's the Tesla model that starts off at $35 grand, I think.

Jim Carr: That's pretty modest.

Jason Zenger: I calculated all the costs associated with it and it's going to cut my automotive expense in half.

Jim Carr: Right, where you commute quite a bit.

Jason Zenger: I'm driving-

Jim Carr: You're driving a lot.

Jason Zenger: Yeah, I'm driving all over the place. Yeah, it's going to cut my commute expense on a monthly basis in half. I'm pretty excited about that.

Jason Zenger: Then I also ordered one of the cyber trucks. I might start using that as a Zenger's VMI vehicle.

Jim Carr: Yeah. I think that technology is going to be well-received. I think there's going to be a big need for all things electric in the future.

Jason Zenger: You see, you're talking specifically EV. EV cars-

Jim Carr: Planes-

Jason Zenger: EV stands for electric vehicle.

Jim Carr: ... buses. Yes, I believe so. I think that's one aspect.

Jason Zenger: Yeah. The one big difference between the gas vehicles and-

Jim Carr: Did you hear Ford just came out with the new Mustang?

Jason Zenger: Right. I know. I did see that. But the big difference between them, at least the way that Tesla's making them, is that there's a lot less parts in an EV than there is in a gas vehicle.

Jim Carr: Right. I'm sure there are.

Jason Zenger: I'm just not ready to pull the trigger yet, but-

Jim Carr: Hopefully some.

Jason Zenger: I don't you'll ever own one. I think you're a gas car.

Jim Carr: Maybe not.

Jason Zenger: And it's okay.

Jim Carr: I'm not going to cry, that's for sure.

Jim Carr: That's what's new at Carr. I'm happy that I'm going to be able to spend some time with my family over the holidays and just chill out because it has been a very tough year professionally and personally. I think it's good to take some time to smell the roses.

Jason Zenger: I agree.

Jim Carr: Yeah. I got a funny question for you. You know, and I'm sure a lot of the Metal Working Nation knows, that I have an affinity for great wines. I've grown this affinity over the last few decades. I enjoy a great glass of Cabernet or even a glass of Chardonnay on occasion. But we are owning The Boring Bar. I was wondering, do you think that we're going to be able to get some great wines at The Boring Bar?

Jason Zenger: I actually had-

Jim Carr: Can I help?

Jason Zenger: Yeah, you can help pick them out. But I actually had a different idea. I actually think that we should private label our own MakingChips wine.

Jim Carr: Oh, that's a great idea. Just slap a MakingChips label on there.

Jason Zenger: Well, there's wineries out there where you can-

Jim Carr: Yeah, it's a great idea.

Jason Zenger: ... give wines that are labeled with your company name on it as a gift. I think we should do that for MakingChips. We just need to make sure we find something that tastes good, too.

Jim Carr: And a value-

Jason Zenger: Yes.

Jim Carr: ... because we don't want to go crazy. But I would be more than happy to help facilitate that tasting.

Jim Carr: No, really, The Boring Bar is our weekly newsletter that Jason and I talk about quite often. If you're not subscribed to it, all you got to do is pick up your smart device and text the word Chips, C-H-I-P-S, to 38470. We don't spam you, we just send you a weekly email.

Jason Zenger: Yeah, once a week. That's it.

Jim Carr: Why don't you tell everybody what's in that weekly email, Jason?

Jason Zenger: Well, usually it's links to the podcast, of course, and then originally written articles if you would like to read, and also videos for MakingChips.

Jim Carr: I love it. It will equip and inspire you just a little bit more than just hearing us on the podcast.

Jason Zenger: They get to see what you look like, Jim, and your new fabulous haircut.

Jim Carr: I know it's a little short, but that's okay. Thank you for saying. At least I have hair at my age.

Jason Zenger: That's true. I'm running out.

Jim Carr: It's so bad. Anyway, what have we got for the manufacturing news, my friend?

Jason Zenger: I have an article from Business Insider. The title of the article is America's Largest Truck Engine Manufacturer just Announced 2,000 Layoffs. This is an article about Cummins.

Jim Carr: I saw this, too, man.

Jason Zenger: What it talks about is that they see orders for heavy duty trucks went down 51% in October.

Jim Carr: What? 51?

Jason Zenger: 51. Yeah, they're 49% of what they were the previous year. That is huge. I'm trying to see a couple of things are popping into my head.

Jim Carr: What? 51%?

Jason Zenger: 51%. There's a couple of things out there that-

Jim Carr: What's driving this? Let's figure this out.

Jason Zenger: I don't know because it seems like people ... I would think that because they get a lot of orders in October, it's probably because the owners of these companies are looking for write-offs.

Jason Zenger: Is this because something has changed in the tax code? I don't know if it has. I'm not a tax accountant. Is this because companies don't have profit to write-off? Is this because they want to do it next year because they're concerned about what the election is going to look like? Maybe taxes are low right now because Trump's in office. But maybe if one of these scary Democrats gets voted into office, they're going to raise the taxes a lot. They're mostly scary. And so, maybe they want to write it off then. I don't know.

Jason Zenger: Is it because the trucking orders are down? I don't know.

Jim Carr: Yeah. It's a "see also truckers warn of a bloodbath as trucking companies go bankrupt and slash profit expectation." What is driving this?

Jason Zenger: Is it because there's going to be autonomous driving trucks out here?

Jim Carr: I did hear about that. I saw it on the news last night.

Jason Zenger: That's one thing Tesla's working on.

Jim Carr: Yeah. Well, what did we just talk about? Electric vehicles. I think that's going to be in our future for sure. There's no question about it. 51% that's huge. There's more to this than we are seeing in this article because that's sending a clear signal that something is blatantly off.

Jason Zenger: Yeah. It says here, "John Mills, a Cummins representative, confirmed a Business Insider that the company which employs some 62,610 people globally would reduce its global workforce by about 2,000 by the first quarter of 2020." Jim, maybe you can do that calculation and figure out the percentage really quick.

Jim Carr: Two [crosstalk 00:10:56] 62 is 10. It's a little less than 5%.

Jason Zenger: Okay. It goes on to say, "It's not clear which Cummins locations or departments will be effected by the layoffs." Then I'll quote-

Jim Carr: I hate when they say that.

Jason Zenger: Well, of course they're going to say that because they don't want to scare people.

Jim Carr: No.

Jason Zenger: I'm going to quote, "As we communicated to our employees last week, demand has deteriorated even faster than expected and we need to adjust to reduce costs," Mill said in an emailed statement. It's what percentage, Jim?

Jim Carr: Okay, wait a minute. It's less than 5%.

Jason Zenger: It's less than 5%.

Jim Carr: #5 is 5%.

Jason Zenger: Right. How many people would you lay off if you layoff 5%? You'd like cut off somebody's hand or something like that, right?

Jim Carr: Yeah. Probably one or two of my employees would have to go at my company.

Jason Zenger: But less than 5% is one out of 20.

Jim Carr: Here's the disconnect is with me in my head. The economy overall is still doing pretty good.

Jason Zenger: It's still doing well.

Jim Carr: The GDP is up. Why don't we talk about lunch?

Jason Zenger: Market's up, everything.

Jim Carr: Right. Just today we talked about that. What's driving all of this is, no pun intended, but with the-

Jason Zenger: That was cute, Jim.

Jim Carr: Yeah. With the evolution of Amazon and ordering online, I think that the trucking or the delivery industry is probably doing really well. What is driving down the trucking industry? If everyone's ordering online and no one's going to brick and mortars and we have to have transportation to move product from distribution to our homes, residences, and our businesses, how is it going to get there? Is it going to be a drone?

Jason Zenger: Well, if you want to get it down to like basic economics, it's supply and demand. As demand goes up for the trucking services, you're going to see more people buying trucks. And as trucking services go down, you're going to see less people buying trucks. But maybe there's something else in there. I don't know. But if you look back at the basics, that's what it would be. But then again, maybe they were over capacity.

Jason Zenger: I know for a long time you saw tons of hiring going on in the trucking industry. I'm not quite sure, Jim. This is you and me playing quarterback economists and industry expert, and we're really neither of those.

Jim Carr: It's an insight-

Jason Zenger: Yup.

Jim Carr: ... no matter what.

Jason Zenger: Either way if they stopped producing large engines, that's going to hurt the manufacturing industry, especially for a large global manufacturer like Cummins.

Jim Carr: 100%.

Jason Zenger: If you, out in the Metal Working Nation, understand this a little bit better than us dummies, Jim and Jason do, please email us jim@makingchips.com and jason@makingchips.com to get more insights.

Jim Carr: We'll be happy to share your insight with the Metal Working Nation if you can give us some good data on it.

Jim Carr: Anyway, we want to get into this because we've talked about the recession many times on MakingChips over the last 210 episodes we've done. I remember early on, Jason, we talked about mitigating the risk of recession. Maybe when we were in episode seven, eight, 10, 11, or 12. But I think it's important that we need to keep talking about it because I think that a lot of the new workforce really doesn't know what a recession looks like or feels like.

Jim Carr: Let me tell you, every recession that I've ever lived through looks and feels a little bit different than the one before. Of course, we all know that the 2008 recession was just a bloodbath to put it easy. It was a lot of people called it the Great Depression because it was so bad.

Jason Zenger: Think about that for a minute, Jim. There are individuals who have been in our workforce for a decade who have not lived through a recession.

Jim Carr: Yeah. My son, for one, he has not lived through a recession. He has no idea what that looks and feels like.

Jason Zenger: It doesn't feel good.

Jim Carr: It does not feel good at all. What can we offer to them [crosstalk 00:14:50].

Jason Zenger: It doesn't look good if you look at your financial statement.

Jim Carr: It doesn't look good if you look at the financial statements. Here's what we need to do now. It's going to come. It's inevitable.

Jim Carr: Here's what we don't know. We don't know when it's going to come-

Jason Zenger: How bad.

Jim Carr: ... and we don't know how deep it's going to be.

Jason Zenger: And how long it's going to last.

Jim Carr: Or how long it's going to last. We don't know breadth and depth and we don't know how it's going to feel, right?

Jason Zenger: Right.

Jim Carr: What can we do, even if it's a very mild one, which in my humble opinion, I don't believe it's going to be very-

Jason Zenger: Well, it seems like with most people, there's a little bit of a dip during the summer of 2019.

Jim Carr: Not for me.

Jason Zenger: Well, it doesn't matter if it was for you. I'm just saying for the populous-

Jim Carr: The general.

Jason Zenger: ... there was just a tiny little dip.

Jim Carr: Well, people equated that to we were going at 150 miles an hour and now we're going to 130 and everyone's upset. There was a pullback that we weren't throttling down as hard as we were. Everyone got used to going 150 miles an hour. Then when it did reduce the throttle, everyone got a little nervous. But at the end of the day, that's not a recession. That's just a slight pullback.

Jason Zenger: What about at the beginning of the day?

Jim Carr: At the beginning of the day, it's when you don't have enough work, you don't have enough backlog to keep your employees employed. That's when you know you're in a recession or you're quoting work so cheap that you're losing money on every job just to keep your workforce on the clock because you don't want to lose them. That's what we saw so many times in 2008. We lost so many skilled manufacturers in our industry to other industries like carpentry, construction, real estate, and many other industries. That's when you know we're truly in the recession.

Jim Carr: What do you know, Jason, about what your dad did before you when the recession came? What do you remember about that?

Jason Zenger: Well, one of the-

Jim Carr: Some tips and tricks.

Jason Zenger: Yeah. I don't know if this is a tip and trick. Maybe it's just the ode to my dad and how good of a guy he was. But I do remember one of the most impactful things when we went through the recession was that he stopped taking a paycheck for a period of time. He dipped into his retirement account in order to get us through it. I don't think that I could do that for very long.

Jim Carr: What's the lesson?

Jason Zenger: The lesson is that as a business owner-

Jim Carr: Have a nest egg.

Jason Zenger: ... have a nest egg and as a business owner, you got to take some hits and you might be the main guy to take some hits. During that last recession, we did, for lack of a better term, trim the fat a little bit.

Jim Carr: You have to.

Jason Zenger: We had some people that were on our team that were just intentionally probably not contributing to the level that they could. And after repeated discussions and sales being bad, we just had to say, "My dad's not taking a paycheck and sales are down. You are not wanting to help us get through this. Everybody needs to get onboard and start rowing to make this better." We had to trim the fat there, and that's not an easy thing to do. I don't say that lightly either, but that's sometimes that has to be done for the greater good.

Jim Carr: I agree.

Jason Zenger: That's the elephant in the room that you need to make sure you look at your people and say, "Who has not been contributing to getting us moving in the right direction?"

Jim Carr: Even before that, I think what you need to do is in the manufacturing industry, labor is our number one biggest cost. It's not rent, it's not electricity, it's not the gas bill, it's not the phone bill.

Jason Zenger: It could be your machine tool loans.

Jim Carr: Our machine tool loans, it could be. But overwhelmingly I would guarantee that any manufacturing company out there it's definitely salaries. How do we bring that down? A) reduce over time to the bare minimum, if any. That would be the first thing to do. Then 2) like you said to your dad, you need to talk about, who can we trim? Who isn't living up to the expectations of our culture and our business? Who can we afford to lose? Another thing is debt. Debt is a tough one, too. You don't want to get caught up with too much because the bank will continue to bug you no matter what.

Jason Zenger: Well, that's the first bills that you have to pay. This might be a point of advice for the Metal Working Nation. I recently closed on purchasing Zenger's from my dad. Now my wife owns 100% of Black and I own 100% Zenger's. We're probably going to merge the two corporations together in the future. But when I was negotiating through buying my dad out, he wanted ... I don't even know how much he was participating in this whole thing or whether it was the attorneys or other people making recommendations, but they wanted me to guarantee payments. Guarantee is a very tough word.

Jason Zenger: One of the things that I sat my dad down and I told him, I said, "Look, here's the deal. I am not interested in buying this company unless you understand that you get paid last." I was really honest with him. I was like, "If you don't like that [crosstalk 00:19:51]

Jim Carr: ... guarantee, that's a very powerful.

Jason Zenger: Right. You can only do that when you're buying it from a family member or something like that. But I told him, I said, "I have to pay my employees, I have to pay my suppliers, I have to pay the bank, and I have a family of four. Dad, I will pay you. But if we go into a recession, I might have to skip some payments. I just want to be totally honest with you about this" because a lot of these topics were looming over our heads because you and I had been talking about it a lot when I was negotiating through this with my dad. He was like, "I understand. He gets it.

Jim Carr: It's not a comfortable discussion.

Jason Zenger: My dad's doing fine. Nobody's crying for Steve Zenger. He's doing fine. And so, he understood.

Jim Carr: I'm crying for Steve Zenger. No, your dad's a great guy. But no, I understand what you mean. But didn't it feel good to be able to communicate that with your dad?

Jason Zenger: Yeah, I need to be honest with him.

Jim Carr: You need to be honest with him and you need to be honest with yourself because at the end of the day, that's exactly what's going to happen. He can't be standing there at your desk with his hand out saying, "Where's my stack this week?"

Jason Zenger: Stack. Do people talk like that still?

Jim Carr: The young ones do. I also have down rent. How do you control the rent when you're in a recession? Negotiate with your landlord.

Jason Zenger: I have three rents that I pay. I have two locations in Indiana and a location here in Illinois. And so, push comes to shove, is there a consolidation that we could make? I know other people own manufacturing companies that have two locations. Do you need both? Do I need all three?

Jim Carr: Right. Consolidation to reduce rent.

Jason Zenger: Well, a consolidation you can negotiate to.

Jim Carr: Yeah. Interesting.

Jason Zenger: Jim, how's your quoting going? I'm seeing some more gray hairs over there.

Jim Carr: It's funny because John, he has been doing a really good job about bringing in new clients. But you know what's great? Sometimes when I get stuck on quoting a job and I think, "Man, is that part really the right price for what I'm going to send to it?"

Jason Zenger: Or you just want to validate yourself?

Jim Carr: I go to xometry.com and I have him quote the job through their online portal real quick, 24 hours a day. They can give me a good insight as to see if I'm close with my pricing.

Jason Zenger: Metal Working Nation, why don't you try it at xometry.com. X-O-M-E-T-R-Y .com.

Jim Carr: Low overhead. Would that mean if you're in the high rent area that you would maybe want to look at relocating to a more urban area that the rent isn't nearly as much? But then you've got to take in the cost of moving and all of that.

Jason Zenger: Well, here at Zenger's, most of our business are willing to take a step backwards. The roots of our company is that we started out as a hardware store.

Jim Carr: You shared that with us before.

Jason Zenger: In the '60s and '70s, we moved into becoming an industrial supply company. We had the premier showroom for tools in the Chicago land area. But you know what? We don't get a lot of activity over our showroom anymore because that's not how people buy. Most of our business has shifted towards vending machines, contractual business, more field level service, and phone calls and emails and stuff like that.

Jason Zenger: We have a higher rent because of the building that we have on a main thoroughfare. I could probably consolidate or move my location in order to make those kinds of adjustments.

Jim Carr: Do you think that would be a top priority of yours if we do feel a powerful recession?

Jason Zenger: Well, I want to do it a power, I want to do it anyway just because of business trends. But I wouldn't make that decision based on a recession because recessions typically are a period of time. I think that by the time you move and all that kind of stuff, that period could be over and then you're going to be scrambling to try to readjust. I would just say think really clearly about if you're going to downsize your facilities or close down a facility because you got to think about it more longterm.

Jim Carr: Yeah.

Jason Zenger: But it's something to consider.

Jim Carr: I agree. I also have here down at the bottom of the list as a bullet point "not getting used to a lifestyle." That's a big one.

Jason Zenger: As it relates to not getting used to a lifestyle, you made a comment recently about the Buick value bot.

Jim Carr: Right. I had an accountant years ago that we were going through a recession and he said, "At least you don't have expensive taste in cars because so many of your peers that I do their accounting for have very expensive lease payments that they need to pay on. I don't see that with you." But that's just my personal preference. I'm just saying that if you do have that champagne taste for expensive cars know that if we do go into a recession, that lease payment or that expensive car payment is not going to go away.

Jim Carr: Again, the monthly payment is due on the first of the month or whatever the case may be.

Jason Zenger: Or expensive houses or multiple houses or other toys. You got to be careful about that kind of stuff.

Jim Carr: Or drinking expensive wine.

Jason Zenger: That's all easier to change.

Jim Carr: It is. But yes, if-

Jason Zenger: Unless you're joining some wine club that you're putting a personal guarantee on it that's $1,000 a week or something like that. Is that the kind of wine club you're a part of that at all?

Jim Carr: Not at all.

Jason Zenger: I wouldn't worry too much about your wines, Jim.

Jim Carr: No, I'm not worried about it.

Jim Carr: But yeah, these are all good things. I know it's difficult to talk about. People say, "Oh, well, I think aren't they being a little overzealous? Aren't they getting a little over-reactive?" But no, I'm telling you all that have not really had the opportunity, if you will, to experience it. It is not fun and please do everything you can right now to prepare yourself for something in the future. Whether it be in six months or six years, you never know how long it's going to last for.

Jason Zenger: I have a couple more, Jim.

Jim Carr: Yeah, go ahead. I'm sorry.

Jason Zenger: I remember very much vividly in my mind, I think I've told this story once before on MakingChips, being in the car, driving over to get Mexican food with my dad for lunch. We are in the middle of recession. He wasn't taking a paycheck and he really just asked me, "What are we going to do about this?" I don't know. He might've said, "What are you going to do about this?"

Jim Carr: Oh, he looked at you and said [crosstalk 00:26:21]

Jason Zenger: Yeah, it was bad. I was like, "I got to change this." That was when I really developed my passion for being in a sales seat because I knew that I couldn't just sit back and wait for customers to call me. I needed to get out there and get new customers, get new jobs, get new relationships, and do that myself. I wasn't going to sit back and cry. I needed to-

Jim Carr: You got to get tough.

Jason Zenger: Take care of it by myself. You've got to get tough and you got to do it. You've got to push your team to do it as well. Everybody's got to be held accountable for it. I would say that would be one.

Jason Zenger: The second one for me would be really to reassess who you are as a company. Really dig deep and say, "Is our messaging correct?" This goes back to sale. Do we have the right purpose" and all that stuff. Related to that but even deeper to that is really to take a look at your business and saying, "Are there things that I can cut to simplify my business?" I don't know exactly what that is, but maybe as a shop you do a little bit of everything, but 80% of your revenue is from milling.

Jason Zenger: Well maybe you say, "You know what? I think maybe all this other stuff I could outsource and I could really just focus on simplifying my business and focus just on milling, just on Swiss machining, or whatever else that it might be." But in some way or another [crosstalk 00:27:36].

Jim Carr: What you're doing, is it profitable or non-profitable?

Jason Zenger: Right. There's a lot of people that they want to be everything to everybody, and maybe the best thing you can do is to simplify.

Jim Carr: You can not do that. Simplifying is really powerful.

Jason Zenger: Yeah. Don't take that as discrete advice because you really have to know your business in order to make those decisions. But these are the things that when you're busy and things are rocking and rolling and sometimes you're like, "Yeah, I want to buy a lay" and "Yeah, I think that we should be able to grind our own tools." But when things get slow, you got to have somebody grinding those tools and you got to have somebody running that lay. Then maybe that's just not the best thing for your company. You need to look at, how do I simplify and how do I get back to the basics?

Jim Carr: You bet. Well, anyway, that was a downer podcast. It's important and we don't want to create fear in anybody by bringing this up. But we just want everyone to realize that it's a real thing and we haven't seen one a long time. The economists are saying it's coming. Just think about it and just take some of these things that Jason and I have mentioned and put it into your own model and see what you can do to mitigate it down.

Jason Zenger: Get out there and start looking for more jobs to make some more chips, even when the recession hits.

Jim Carr: You bet because-

Jason Zenger: If you're not making chips-

Jim Carr: ... you ain't not making money. Bam.

Speaker 3: Metal Working Nation, listen up. Manufacturing is challenging. You need to think different. The day to day whirlwind of urgencies, the pressure to grow, customer demand, workforce development, new machine tools and robots. The list goes on and on. It is possible to stay ahead of the game of manufacturing, but you can't do it alone. We're here to give you access to exclusive content from other leaders as well as videos, blogs, show notes, and more resources designed to equip and inspire you on MakingChips.

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