From Panic to Profit, Via Data with Bill Canady, CEO at Arrowhead Engineered Products

o do you have like a process place or some sort of framework for what you do?

, In order to, , get things, from disaster , to being turned around? Yeah. , 

Bill Canady: From panic to profit, right. , Yeah. You know, yeah, actually I do. And,  interesting. Piece of it is I have a process. I call it a hundred day process. And actually the speed that you go through, it depends on just how severe things are.

, You know, , if you're worried about making payroll and , keeping the side of your bank covenants, things like that, you're gonna go really fast. , If you have more time , of course, you'll take a little time. But, , it's a four step process. The first step is , you get your team together, typically offside, and, you start with whatever the goal is.

Now, that goal , is set , by the CEO or yourself, which is generally tied to whatever you've committed to your board or your investors. , , your first step of that is to get everyone understanding what the commitment is , and what it looks like. You'll, go away and, come back in 30 to 45 days.

And, , in that second meeting is the strategy. so we know our goal, we know what we've committed. Let's just say our goal is to get to , a hundred percent of whatever it is. , On that second meeting, it's what is our strategy to get there that is typically owned by the people who are actually running the business, ,  the presidents or the VPs, the people who are the daily, , operators of the business.

And it's important they own it. , Because if they don't, then they're not gonna believe in it. . The third step after that, once , you get aligned around the strategy , of what you're gonna go do , is, , , , , the reorganization or the organization you need in order to go accomplish it.

, So if you, if your goal is to get to a hundred. Uh,, We're gonna do that , by getting better at what we do. Let's say it's taking care of industrial customers or something, and we know what those customers are, , then how do we have to be organized to go take care of that? And then the final meeting, , which is generally right about the a hundred day mark is the action.

So you get aligned around these are the steps you're gonna go do. So it's. People setting in new chairs, new skills getting developed. Well, whatever it is. So it's a very straightforward process, laid out over a hundred days that you can thoughtfully get people to. It feels fast when you're going through it, but, , not as fast as it generally needs to go , given the situation.

Richie Cotton: Alright. You make it sound so simple. So find your team and the goal. Figure out your strategy, reorganize the company,  and then, , figure out , what the next actions are gonna be. Yeah, 

Bill Canady: that's. 

Richie Cotton: , It sounds easy. I'm sure it's not. , Okay, so I'd love to, , introduce data into this 'cause, uh,, obviously a horror audience cares about that.

So talk me through what data do you need in order to be able to assess, , the state of the company? Because , that seems like your first sort of step. Absolutely. So when you show up on day one, 

Bill Canady: your first step you're gonna do is , you have three. Goals , , , or situations you really want to address.

So the first is everyone's aligned around what good looks like, right? That, , that's your goal. The second piece is you have to get the data so you can make a data-driven decision, things that are happening. You can argue about a lot of things, but you can't argue about the facts, right? You may think the facts are good or bad or somewhere in between, and then the third and final pieces, you're generally looking for anything you can do to help the company survive, right?

You're looking for cash opportunities, raising prices. Reducing expenses, anything like that to help stabilize the business. So in the data piece,  the two main, , , , sets of data you want is you want to know about your customers and you want 'em ranked from the best , , to the smallest.

You would the biggest. To the smallest. And that's generally by profitability. We'll look at things around just. , Their gross margin , , or things like that. And then you wanna look at your products. What products am I making a lot of money on? What products am I not making a lot of money on?

There's some other data that if you can get it quickly, you really want it, like people, and, , what are my personnel costs and how many people do I have? You wanna look at, , where your money is being spent , and just things like that. but you really need to know around , , , , , your products , and your customers.

But. , , Sales material costs, direct labor, overhead volume, and it kind of goes on and on from there. 

Richie Cotton: Okay, so a lot of these things, they sound obvious when you're saying like, you need to know what are your, , your most important products, who are your most important customers, things like that. , Is it really the case that when your business is failing, people aren't aware of this sort of stuff?

Or is this just you're coming into a business fresh, this is stuff you need to understand. A 

Bill Canady: little bit of both. You'll be  surprised about, , how little the team will actually have a grasp of it. , They'll understand their business, they're running day to day, but clearly something's not going right.

, And typically what we find is, , when a business is struggling, they're trying to do too much. So they're treating all customers is if , they're great. Some customers we lose money on, They're treating all products as if the products are the most important. Some of those products we are not very good at making and we can't make money at them, but there is a set of customers and there is a set of products that we make all the money on it.

And , if you think about those, we rank 'em. So we identify what the customers are. In our top quartile, , , those are our A customers, , That's where all the money comes, represents generally about 80% of all the money we're actually making, and it's about 20% of the customers.

Now, those are just rules of thumb, , but you'll find that holds true. I. And the bottom piece, , the remaining customers, the remaining 80% only produce 20% of the money that we're making. And we'll lay those out. We do the same thing for the products, and we start looking at our best  customers and one of the best products that they find as these are good customers and we know they're good because they buy a lot and they pay their bills.

These are really good products and , we know they're good because we make money on 'em and , we sell a lot of them. We wanna really focus on taking care of that, make sure those customers are happy and those products are available for them on the ones , that aren't doing so great. , Maybe they just buy an item every once in a while and maybe we don't charge 'em enough.

Things like that. We have to go and figure that out. And in order to do it, we have to know the data. You'll be surprised. Most people have no idea if they're making money or not on a customer. , They just have a feeling about it. I like the customer. The customer's difficult to deal with. They're somewhere in the middle.

Richie Cotton: You mentioned, , 80 20, , so this 80 20-year-old, the Pareto principle. I know you're a big fan of that. It crops up a lot in your book. , Can you talk me through what you do about it then? So once , you've figured out who your best customers are, what your best products are, how do you make use of this principle to then help your own business?

Bill Canady: we all grew up hearing about burrito principle. You study it in  school and things like this , and it's basically is just, you make the majority of your money, in this case, 80% of your money from 20% of the things you do, whether it's our clothing that we wear, or the shoes that we wear, or where we go.

We spend most of our time on things that , are just a very small subset of everything that we could be doing. And what we find in a business that's lost its way is generally they just have too much of everything, too much inventory, too many customers are not making money , and as we said, too many products with it.

So once we have those identified though, what we'll do is we'll put those in what we call quads and quartiles. So we'll put 'em on a very simple spreadsheet that lays it out and say, these are our best customers, our A customers, and these are our customers that we don't make so much in. These are our B customers.

Same thing on the products. As and Bs. We'll put our A products with our A customers and that just like our best customers. They also buy products we, we don't really want to sell. They don't just buy all the ones we'd like to sell. That's an A customer with a B product. We'll take our B , customers who don't buy a whole lot,  but they buy products we really do like to sell.

So that's a B customer with an A product. And then we have our B , customers that don't buy a lot, buying products that we're not good at selling B. So it's B, B, so aa a, B. BA and bb. Very simple, just laid out. And then there's specific action that we'll go, and take around each one of those. So, , a customer that doesn't buy a whole lot, , that buys a product that we don't make any money on, we're probably gonna raise the price on that pretty quickly, because even if we lose that business, even if we lose that business, it's okay because of, , , we're losing money.

But by stopping, we actually make more money in , our pocket, Then if you look at our best customers buying our best products, we're gonna be much more thoughtful about it. The last thing we want to do is lose a great customer that we make a lot of money in. So we lay that out in each one of these and things like that.

Let's say it's a B customer, but they're buying a good product, but the customer isn't as valuable. We may do things like, we want you to place the order  only online, or maybe instead of having a salesperson come and call you, go to a website, things like that. Maybe we don't wanna actually extend them, credit you'll pay, but you'll pay with a credit card, , all these actions to really reduce the cost of serving to them.

Richie Cotton: that's really interesting that, , if you've got a product where there's not many people buy it, but , those people who do buy it, you know that they're good customers, you're probably gonna still need to carry on, , making that. Whereas if it's, , , a niche product that. , not many people are spending a lot of money on, then that's something you can get rid of.

Absolutely. Okay. , Actually, , do you wanna put this into concrete examples? You've got like , a real business where you've seen this in effect. 

Bill Canady: Yeah, a hundred percent. so if you look at my, a couple companies, , I'm over now on one of 'em, we have 40 operating companies in, right?

The other one, , , bigger companies. There's about nine operating companies in this. So this is something we look at each and every day. And, , just a couple of examples. So we went out and, , looked at, , one set of customers we had. And what we found was the vast majority of our  business was made out of 20 customers, right?

So we had over, 10,000 customers, customers, 20 customers. Made just about all the money for the, business. And so we started asking ourself, like, when we look at those, how do we take and we, we go and, how do we get more of that? So we needed to grow the business.

Our number one customer in this case was Toyota. and when we were looking at it, we were doing about $40 million a year in Toyota, which is , a lot of money to be doing in any particular customer. In order for us to really save the business and get it turned around, our overall number that we needed to go get was a hundred million dollars, which , sounds like a lot.

We had 20,000 customers that they can go with. We had these core customers and we looked at, we said, let's just start with the very first customer. What would happen if we sold everything to them that we could sell to them in areas we're already doing? Now what does that mean? So we were selling to 'em only in the US in certain states.

So we weren't selling anything overseas, and we were selling them things like pumps and  motors and all sorts of products, but we weren't selling 'em like fenders or tires or anything like that. So it had to be the core products in the areas. We went through and we did an analysis and we recognized that if we had all their business, all their business that we could get, it wasn't a $40 million customer, it was a $250 million customer for us.

Just in the number one, the first one in the top of the list, we only needed a hundred million for the whole company in customer number one. It was two and a half times more than what we needed. And when we went through our entire list of these top 10 customers, we found ourself looking at candidly, , a big multiple of that.

And that starts making you think differently. And so we started looking. We looked all the way down at the end, and our average customer on the end of this, these 20,000 customer, their final, , , 5,000 customers were buying less than a thousand dollars a year for us. But we had a salesman calling on them.

We had accounts that were calling on. All of our past dues were all in  this, section here. So we made a decision. We said, , on these smaller customers, you're only gonna be able to place your orders online, and you're gonna have to pay for it upfront. So we had a website for 'em. We'd send 'em there, we'd set 'em up with their products and they had to take and pay it.

We gave them no terms at all. All of a sudden, our accounts receivable, a ar, I didn't need someone trying to collect those anymore. Those people , could be deployed into an area , where it made more sense. We took our salespeople who were out calling on these accounts that were worth nothing to us, and we moved them over and we wound up putting an entire team around the Toyota business.

And when about 18 months, we had almost doubled our Toyota business by getting focused on it. And you know what? Toyota loved it. We were able to put more inventory in. We put people actually in their factories. We started expanding our services with it, and it went on and on from there. That's just one really simple example of where understanding where you're making money and in partner with those customers make all the difference for you.

The data shows you that really quickly. Yeah, 

Richie Cotton: that  just aim , , again, , , it sort of seems obvious when you say it out loud that you should put , most of your sales effort into your high value customers. It's interesting, , but it seems like there's also an angle for automation there.

So for the customers who you maybe want to keep but you don't wanna spend a lot of effort on, 'cause they don't give you much money. Can you talk me through like how you go about automating these sort of, , interactions with lower value customers? 

Bill Canady: That's key to us, right? We're using a lot of AI today.

You know, AI is a buzzword that's really kind of , come huge over the last few years, but it's been around forever. You had, you used to call 'em, , , , , , , RPAs or process automation things and we put something we call it around dirty, dangerous indu jobs, right? So go back. We talked earlier about, , accounts receivable and accounts payable.

If you look at an accounts receivable team, they'll have literally. Thousands of emails coming in and out of those on a weekly basis, people were going, , hey, you've cut my account off. I need help with it. This bill is wrong. Do something here. I need a credit. And it goes on and on. And typically these teams are understaffed , and  overworked.

It's an administrative function, and the turnover in those types of things are just astronomical. People generally don't like the job because you get a lot of people yelling at you. Either you're trying to collect money from someone or some money. Someone's trying to collect money for you from you, and it's just a really tough job, right?

It's a very important job. And so with using AI today and these automated processes, you can set it up. So when. , An email comes in, it first goes through a filtering system, right? A tool or an algorithm that looks at it and said, okay, this is what they're looking for is, can this be handled automatically?

Like simply someone they've gone, , they've bought more than what their credit limit will let them do. They can take and pull their credit, they can look at our history with them, and then either increase the credit automatically or deny the credit and say, you have to pay this with a credit card or some other type of thing.

All that can be handled automatically, Second thing that comes in, people get, , logged out of their account and , , get stuck from their account. We do it every day. Your password doesn't work. You can have a human being that has to do that, or you can  make that automated right. So you go on and on through these things, all of a sudden you're starting to free people up.

So in our a p ar group, our turnover, when I first took the company over, it was over 300%. People just hated the job and would leave them, , because of just the way that they're treated, , , with a lot of , the external, , , information coming in. When we took and put in all the AI systems, and this was not easy, it took us a year to get through it.

First, you had to figure out what was wrong. Second, you have to fix your system. Then third, you have to get a process in that you can automate it. today, our turnover in that team's, less than 10% people love the job They're working on what it needs a human being. The rest of it's just automatically done with it, So you'll find this, , these are those kind of dull jobs that wear people out. Same thing in dangerous jobs. If you look at some of the machinery we have, you get too close to it. All of a sudden things like can grab you and do a lot of damage to you. So we think have things on there now, like with cameras looking at the machine light.

Fences. If someone sticks their hand in there, the machine automatically stops down.  The camera can take a picture of whatever we're manufacturing and make sure that it's with inspection, you no longer have to physically go in and touch a lot of these things. If you're putting bolts and nuts and things like that in a packet, you can have it.

So every time you take your, , , the parts and pieces that are coming in and you put 'em into a bag, that camera can actually take a picture of that AI can look at it and say, yes, everything is here. It's a private and accounted for, and the light goes from red to green. That means you can move on. .

And you're seeing this day in and day out. Now what it does is it makes the jobs more, , , satisfactory. Our customers are happy because they're getting what they need, but most importantly, it's freeing people up to go to higher value type jobs. Jobs where, , it's not a machine that do it. And consequently you get people who are better trained.

You get people who are happier with the job, they make more money, long run, and then turnover stays where you want it to be, and, , the company grows. So it's a, it's really an exciting time to be seeing all these tools coming out. 

Richie Cotton: I love that story. 'cause so , often like the narrative around AI is always is coming to take people's jobs  and it's like in competition with humans.

But here you're saying, , like with the, accounting example, the job is so boring. They have like a 3% turnover rate, , of staff and it dropped to 10% because once people got the better tools, the job came more fun , , And people stuck around. So I really love that story. It does sound though, , , once you've freed up all of these people from these, , the sort of dollar or dangerous areas, then you're gonna have to retrain people. Can you talk me through how that works? 

Bill Canady: Yeah, it just depends, right? Sometimes, , it's not so much a retrain, people are leaving the job, it's just you're taking a part of the job that they didn't really wanna be doing anyway.

 And now you can get more throughput that's coming through. So instead of having to sort and count and have someone else come back and verify the machine does it , now the person is looking at it, maybe they're actually assembling the part, or maybe they're taking that part and putting it into something else.

So it allows them to do something that's higher value. And typically things are higher value. You make more money doing it. . So it's the. putting the lug nut on a car versus actually  wiring the harness that goes into it. . So what we have is we look at training around what we call the seventy twenty ten.

So 10% is formal training. , Through, we have what we call, , the Gibbs process, the Genstar industrial business system that we have with all of our companies. , And we have formal online training where they would go in and learn how to do a lean activity like a kaizen or how to apply and deploy 80 20 or it goes on and on.

We have a vast library of training, so that's the 10%. We expect them to do that on their own, so they're setting out a computer learning, they can do it at home. If they have access to the internet, they can do it during their job. Whatever works. The 20% then is some type of classroom and mentorship, right?

Where maybe you and I are working together and you run this machine. I come over, you show me how to run the machine, or you show me how to key in the code , for the computer, whatever. That's the 20%, and that's where they're working with another person who is more experienced at whatever they're doing.

And then the final one's, the OJT, that's the 70%. That's really what we learn. It's like first time you did this podcast, right? You're saying you got all this  stuff in front of you. You probably did a little YouTube search. See some videos, tell you how to hook up your microphone. Next thing you know, maybe you talk to a couple of people.

Then finally, you gotta press the button and start recording. Right? Same thing in our world. We try to capture that, put it online so they can see examples, do case studies, but , a lot of it's just moving 'em through that process. So if you were, we'll use the accounting clerk before, if before you were really just answering emails and being overwhelmed by it.

Now all of a sudden you don't have to do that anymore. You can do the job, you can get deeper into what it takes to become an accountant or a bookkeeper or as whatever it is that you wanna do. And there's classes you can take from us. Classes you can go where else that's gonna help you in your career progression, your overall happiness, which.

Typically results in more money for folks. 

Richie Cotton: Okay. LI think you've got a mixed then of people taking courses and then there's like the social aspect with people training each other and then sometimes just, , , you do the job and you find out what you don't know and yeah, you figure out , how to do your job at some point because Absolutely you need to.

Yeah. Okay. That's interesting. , Do you find there's a difference between, . This  sort of reskilling where people, their jobs have changed and they have to like then move into a new area versus they're just doing the sort of day-to-day, I'm trying to get better at my job to get promoted or whatever.

That's, it's complete versus upskilling. 

Bill Canady: Yeah. Yeah. It's complete variety. Some jobs go away, right? We don't. The old joke is we don't make buggy whips anymore, right? So , , , we now have cars and , , , there's still, there's probably a small market out there , that people , , need them. But, , it's not big enough to sustain a lot.

So from time to time you will see that the biggest issue I've seen with people, , it's time go by is the technology aspect, is you know how to do it manually and then, , that goes away or a new way comes in. Now there's something, , electronic , comes out Now, before we were.

, , , you do sign papers and then next thing you know, you got an email, you had to print it and sign it. Well, today you've got DocuSign and you've got all these different tools that you have to learn how to click through it on that. The technology curve I see is a bigger struggle for a lot of people than the actual doing of the job that time savings, , , I remember the first house I ever bought, so it was my wife and I and ,  it just happened to be that we were going on a trip at the same time.

And, , , so we had to sign some documents and things like that. And, , we went out west, we were out in, , South Dakota, out at Mount Rushmore's, little vacation they had to overnight or FedEx , the package to us Right. To get it. And I remember we, we were sending in a, in a Denny's restaurant, reading through the paper to sign him and put it all back in.

And that was pretty cutting edge at the time, today, that same document, I'll get it on , my iPhone. I'll open it and then it'll accept my signature and it's a legally binding document. You have to, as an individual, , , , be willing and capable of making that transition from a, what they call a wed ink signature all the way up to a , digital signature.

And it's tough. Some people are really comfortable doing it, some people are not. I have yet to find anyone who's not capable of doing it, who's been doing the job before. If you could do the job, before you can do the job today. It's just, there's generally a technology that's getting between you and what it was.

It's. Sweeping the flow.  One point you probably use a broom, then you get a machine to sweep it, and now you got a vacuum cleaner. You gotta be willing to learn it. Some people really will struggle with that. Those who are gonna struggle with that, they're probably gonna take and change careers, right?

They're going to be looking for something else. You see all sorts of programs out there from companies saying, Hey, would you be able to open to this, to going and doing something else? Getting retraining. A lot of the, our community college system is probably the best I've seen of where you can come in and get retrained , to maybe you were a clerk and doing something in office.

Now you're gonna go work a machine and be a machinist. , Wonderful jobs, lots of way to go do it, but at the end of the day, the person's gonna have to have some ownership of it too and be willing to put themselves through it. 

Richie Cotton: Absolutely. So it sounds like, , one of the big skills you're looking for is , , is that mindset of I'm gonna be able to keep learning new skills.

, , Do you wanna talk me through Yeah. What do you look for in, in your staff when you're taking over this new company? 

Bill Canady: Well, you know, when you first come in and you're the CEO, you're looking for people who have that continuous learning  mindset, right? , Who will say, okay, we gotta do something different, and I'm going to go with, I have to go be one to try it.

It's not always easy, , and you'll find depending on the role. A lot of times , they'll blame themselves, , , or they'll say, , look, I was just doing what I was told to do, or, , you don't understand. , We were doing, and that's true, right? There's nothing wrong with it. But now we have to change for whatever reason, and we've gotta decide where to go.

It can be a challenge to take people from the journey of, this is what I was doing to, this is what I need to go do. Because , it may be considerably different, right? , You, you wouldn't be getting a new leadership team, a new CEO if things were going great. So , since we've gotta get a change, , that means we have to do things differently.

And, , everything from, maybe we don't spend the same money in the same way we did before, maybe how we were, , conducting our business thing. It , has to , be different. So that willingness and openness to embrace it, that agility and flexibility to go from where you were to where you need to be.

Some people naturally thrive, , in that space. I mean, they love it. They just love the change and the excitement it brings. Other  ones feel attacked , , and they feel unsafe. And when you start creating an environment where people do not feel safe and you start losing people, And you don't want that, but , generally there is some turnover. , The best thing you can do for people who don't want to do it or can't do it for whatever reason, is help them go and do something else, , If they cannot see themselves doing it. Then they probably are not going to do it.

So whatever they believe is probably gonna be the outcome. , And then our job is to be , a thoughtful human being that helps them, whatever that next stage is. Either get learned deeper, get that training, , or go do a new job wherever that may be. 

Richie Cotton: certainly I can see how if you don't want to change, then that's not gonna be a great situation for the company if you're trying to turn things around.

I mean, we talk a lot about Datadriven decision making on the show. If you are trying to turn around a failing company, then you're make a lot of tough decisions. Does data driven decision making, does that hold up in, in these sort of tough situations? Can you use it to make tough decisions? 

Bill Canady: Yes. The only way you can really make tough decisions, 'cause you gotta move it from the  emotional to the data driven.

So you look at it from both sides, right? , So I'm coming in, it's not going well, , we've gotta go fix it, so we identify what we think we need to do based off the data. Now you're the person who's already here and here comes , this guy , and he's saying We gotta do things differently.

A lot of times the staff doesn't know that the company's in trouble. . You can look around and see things aren't going well for whatever reason, , but you just don't understand how challenging it could be. So many times it'll be a shock, right? It's like, oh my goodness. And your first, , instinct with all of us is, alright, how, what does this impact on me?

Am I still gonna have a job? Is this company gonna make, I've dedicated a substantial report and important part of my life to this? Is this even gonna make it Then, do I even wanna be part of this? ? Do I like this person? Do I believe in what we're doing? So there's a range of emotion that everyone goes through.

, So you try to get through that. Then the next piece is is that a lot of the things that person might be hearing, they'll say, , we've already tried this, or this is, you've seen this before, right? And all that may be true, but  nonetheless, as the leader coming in, you gotta get the facts in front of you.

You gotta understand what it is, and you gotta start making decisions based on the facts and the facts that we live with. Is data right now. It's not black and white. The data may be black and white, but there's always a lot that goes into it, right? There's timing and what was that? This was during a pandemic.

This was not during a pandemic. Well, this person was here and they made it miserable, or they're gone now, so there's so much in there and you have to be able to cut through all that, And you gotta form this partnership with them. This kind of give and take that, , , whereas. It's about progress, not perfection.

, It's that people have the belief that if they do the right things not being perfect, but if they do the right things, then they're gonna be okay. And you have to create that space for them and show that. So it's important to get some wins. It's important to get people focused as quickly as possible.

'cause the clock is ticking. , And then at the same time, you have all the outside influences. . There's you as the leader. There's that employee who has all this coming out and they're like, well, this wasn't my fault. Then you've got your customers who may not wanna stick around. 'cause if they don't buy, then  we're for sure in trouble.

Your competitors, your suppliers, your investors, all these have a stake in getting this right. So as the leader, the number one thing you're looking for is someone who can, right. Is able. And will they want to, right? So it's someone, , they come and say, Hey, we are where we are. We're gonna, let's get through this together.

You're like, oh my God, thank you. ? Because you don't have the magic eight ball that you can shake, and it says, oh, , just do this. , It's people working together to try to solve a common problem. It's going to protect. Everyone and allow this company to grow. And as the CEO, you always have competing thoughts in your heads, right?

, , That you can go too hard one way or the other on one side. As a CEO, you're responsible for the success of this business. And there are, in some cases, thousands of people depending on it. There's the employee, there are family, there's the suppliers , and their employees and their families, and it goes on and on.

So you gotta do what's right for the company. On the other side, you've got the individual who's living this every day  who needs a job, they gotta pay their mortgage, and they have children in school and things like, and you wanna make sure they're taken care of and they need a raise because heck, they probably haven't had a raise in a while.

And somehow you have to get those two to bridge and go together. And you do it just by trying to be a thoughtful human being to where you. , You weave your way through it. So you've got the data, which is a known, and it's one of the few things that you can know. I know this customer likes us because they are buying from them.

They may hate us, , but they like us enough that they still are buying from us and paying the bills, and I know these products are producing. So you have these facts. So you start from what is known and then you build around it, but you go fast. 

Richie Cotton: So all the stuff you talked about there, it sounds like, , you start with the data, but then , the real key to getting to good decisions , is through empathy.

Then 

Bill Canady: empathy is the key of it. You know, it's so funny if it's like if you ever scrambled eggs, right? So you take the egg and , you mix it up. If you beat that egg just a little bit, you get one consistency. If you really blend it a lot, you get a very different outcome in the egg and how it  tastes as a scrambled egg will be vastly different.

The same thing here. , It's not just the facts of this is what it is, but it's the facts under certain circumstances. And you have to recognize you can have a massive impact on it that's gonna make it sometimes a light and fluffy omelet and other times a very dense, , kind of a mess. . , 

Richie Cotton: Okay.

, I like that analogy. Yeah. , I can certainly make a lot of mess with, , with eggs , if you do it wrong, for sure. , Cool. So, , just going back to some of , , the data aspect of things. You talked about, , one of the first steps you need is a goal. I'm curious as to what sort of like business metrics you're gonna track.

What are the most important things to track in order to judge Is this business still gonna be viable? 

Bill Canady: That is the magic trick. ? And you know what's interesting? It starts with really whoever the owner of the business is, right? Whoever the owner is. And so what I mean by that. If you are a private company, you're owned by an individual or a family, , , let's just say as the example.

Then whatever the goal is, it is , the goal or the values of  the owner that may be taking care of the community. It may be giving back to the employees. It. It could be they just want a bigger boat, A lot of times what most families value at the core is the dividend. This is how they live. This is the income to family experiences, They wanna protect that generally, in most cases, not always, but generally. 'cause if that goes away, there's no business. So as the leader, you need to understand what motivates them, what it gets them excited, what's working, what do they have to protect. A private equity company generally is wanting to triple the value of their equity investment in five years or less.

Three to five years. Could be more, could be less. They could make 'em want a bigger return. But an industry standard, a good one is three x in three to five years. That one's really easy because you know it's about making more money. The only way you can triple the value is make more e , earnings.

? More ebitda. A public company is by far the hardest one to do because they're a combination of values and mission. The mission is to grow. The value of the  stock. Three times would be fantastic. The rise may or may not be the same. But they also are driven by these values that are everything from giving back , , , and DEI , , and you name it, right?

All the different, , , acronyms that are out there today could or maybe, , have an effect on it. And generally, because they run on a quarterly basis. It starts out at beginning of the quarter, a lot of times around socially giving back, making sure people were looked after, and then at the end they know if they missed their earnings, their stock is gonna tank.

So they have this up and down focus that lasts about 90 days. I. Private owner, his horizon could be 50 years and a private equity owner, a sponsor is generally about five years or so. , So it's knowing who you're working for, understanding what they value. Then taking that and getting down to a very simple goal.

This is what I have to go grow. The fuzzier. It is, it's harder for people to know, , that it's harder for them to, , execute successfully on multiple priorities. The simpler, the more straightforward is the higher  probability you have of getting it. So that's the job of the CEO is understand that, translate that into something quantifiable, some type of data, some type of number that everyone can 

Richie Cotton: rally around.

, these all seem like fairly standard business metrics. So I guess , the important thing is just knowing. What a sensible goal is for whoever's, , , uh,, paying you , or, uh,, being in charge of you, then okay. It is pretty straightforward. There's 

Bill Canady: nothing matching what we do. The real issue is if all the companies I've came in and been CEO been president of all that I have yet, when , I go in that first meeting and I sat down with my leadership team, I say, what is our goal?

What does success look like? I have yet to have one, , group that knew it never, it's never happened. . They'll say, I gotta sell more. Well, how much more , what, whatever my budget is, I've gotta do this. It's all, you'll be surprised they will not know it. Even though, particularly in private equity, we all signed the same contracts that say it implicitly.

, This is what our goal is. It tells you in the contract, I've yet to have  anyone who knew 

Richie Cotton: it. Interesting. So that certainly seems like it's an important job of the CEO to get at least all the management team on board with , what their goals should be for the 

Bill Canady: company.

Think about this, Richie. If tonight when your wife gets home or maybe she's home right now, , you get notice, you go in your, ask her, you say, honey, what does success look like for us? And quantify it. Not just a happy life and all that quantify you, you think you and her would have the same answer? , Yeah.

Absolutely not. I'm sure I can even 

Richie Cotton: quantify it for 

Bill Canady: myself, but my wife's right outside the door. I walk over and I say, well, she go like, first of all, leave me alone. . And second of all, why are you Bobby? ? , But it's interesting. It's, we're with these people every day. We typically spend more people time with the people we work with than anyone else.

And we are not all working after the same goal. 

Richie Cotton: Okay, so that seems like we need to talk about like, how do you form this plan then? Is it just a case of CEO says this or. , How do you get everyone on the same page? 

Bill Canady: , You just start from day one again, sounds easy. And everything's easy to the person who doesn't  have to do it, right?

So you, for me, , I put in a very, not rigid process, but a process with dates and times , and this is how we're gonna decide. So, in private equity, I know what the goal is before I even get here. It is the goal of the private equity owners, right? And they have determined based on industry norms, numbers, what they expect.

They're gonna get that in order to get the return they seek. This is what it looks like, and it's just a number. You're at, , 50 today. Your job is to get it to a hundred, okay? Says it right in the contract. The only way I get paid is to go to a hundred. I know that everybody on my team has that same contract.

. You start with that and then this is where the magic happens, Richie. You say, , how do we go from 50 to a hundred? How do we do it? How do we do it? I like to use military analogies because we've all read about and seen and on the news, , things in wars and all that. So the general  says, , so the president says success is winning the war.

The general says, all right, to win the war, we gotta go to this country, right? We're gonna go to this country, we're gonna take the capital. Whatever. It's obvious, we know that is what winning. Everyone will agree on that. The general gets , , , his kernels and his staff together and says, we have to figure out how to get to the enemy's capital.

Everyone agrees on it. Now the question is, Richie, do you think the general should figure how to get to the enemy's capital, or should it be his staff? 

Richie Cotton: Yeah, so that's gonna be tricky. Like you can have a lot of staff with a lot of different opinions, , and I guess , the staff have to come up with the ideas and the general has to pick one.

Well, that's 

Bill Canady: almost for sure. That's exactly right. So the staff will say, well, we can go by boat, we can go by air, we can go by land. I'm taking this analogy way too far, but you get my point. So they all come back with their thing, and it's typically tied to whatever their specialty is. I'm operations, I'm sales, I'm finance, and then you  all get together in the room and you have to pick.

, and each person has to do theirs. So the salesperson has to go sell more. The operation has to run better, but it has to be aligned to the goal of , taking the flag of the enemy, right? Go capture the flag. It has to be aligned around that. And so since you've picked the flag, you know where it's at.

Everybody knows where the flag is and what it looks like. They have to do their part. If you tell them how to get there, they almost will for sure fail, , because they'll say. Well, you know, Richie, you told me that, , you got, I wanted you go by boat. Well, you know, I'm not a boat person. I'm, I'm a plane person, Instead, you have to say, look, you're gonna go, you gotta go capture the flag. You tell me how you're going to go get there, and then you hold 'em accountable. You have to look at it. You have to look at their data that says they can do it. They have to lay out plans. That tell you, this is what it looks like.

This is where we're gonna muster our troops. This is the equipment we need, this is our plan, our strategy, everything. They have to put that together. If you do it, they will not believe you. They  will fail and they will blame you for it at the first signs, because they'll go, not my plan, not how I would've done it.

So the general will pick the target. The staff tells you how they're gonna get there. 

Richie Cotton: That's the strategy. Alright. I love the idea of empowering workers to make their own decisions about how they go about doing their work. , I feel like we, we have maybe taken the analogy too far. I think there's gonna be a lot of listeners, but you like, I'm gonna go and invade , my, in my competition.

Yeah. I want to go out and, , take over Coursera now myself. , Yeah. But we, I agree with you, but this 

Bill Canady: is the same way in any business or anything else. You gotta pick what the goal is. You have to set the goal as a leader and then the team has to say, this is my strategy of getting there. ? This is the strategy of getting there.

, You have to agree to it, , and a lot of times it's around we're gonna sell more and we're gonna do it at a cheaper basis. , They have to be the ones that own it because they're the ones that are gonna go out there and figure out, , because every, , Mike Tyson made the fa, everyone's got a plan till they get punched in the mouth.

It's the same thing. We have a plan of getting more customers and things like  that, but as soon as we make a move, our competitors can make a move. Our customers can make a move and all that, and they have to be willing to be flexible and make the changes. And you do that simply through data, You look at it and you say, given my team and what I'm strong with and weak.

And given this data, how do I , best organize myself? 

Richie Cotton: Absolutely. And it seems like the trick then is monitoring, , what's going on. So I think it's a topic dear that aren't many data people. How have you got Mo? How about monitoring stuff? So once you've picked your targets, you've decided how are you gonna go about doing it?

, How do you make sure you're on track? 

Bill Canady: There's a lot of ways to monitor it. They're probably all good. , , if you go back to the, this is using lean terminology called policy deployment. , We have , a tool that we use based off of policy deployment that we call the strategy management process.

But it's basically taking what we agree on. , And then we lay it out in Excel or whatever tool we want to, , and then we'll have monthly meetings where we, are we on track? Are we behind or ahead or wherever we are? And given whatever is happening, what are we gonna do about it? ? So we have a. A series  of monthly meetings, , quarterly, monthly, weekly meetings that, , that a team gets together and say where are we versus where we thought we would be.

And it's all monitored really just , through data. So in terms that we use, if you're familiar with policy deployment or any of , your teams are, or things like the X matrix and bowler charts , and a threes and all that. So if anyone's done any of that stuff. that will resonate with them.

But the important piece is you just have to write down what your goal is and measure where you are to it. And you need to look at that as a whole team at least once a month. The team that's doing it needs to look at it every week, and then the individuals probably looking at it daily and it stacks itself all the way up and you constantly are evaluating where you are.

Given that result, what should you do? Should you do more? So stop, start, or go, , , or continue? So should you do more, should you do less, or should you modify? 

Richie Cotton: Okay. , I do like the idea of , the stop start continue tool to say, well, are we doing stupid stuff , or not? Or are we doing good things?

Which one should we continue with? Alright, wonderful. ,  So before we wrap up, I think we need, , another happy story. Do you have any more success stories you can tell us about of, , businesses that have been turned around? 

Bill Canady: Yeah, absolutely. So, , a recent one that, that we did, we came in the business was about $700 million.

Top line, about 70 on the bottom line, , and, , was worth about $700 million. , In 18 months we were able to get ourselves together. Take it from 9% EBITDA to, , almost 18% ebitda. , and that was really through just deploying the model, , and in that time, so the business group of 700 million to over a billion dollars and almost $200 million on the bottom line.

And it was really nothing more than just doing , basics, right? And the basics, no matter what tool set you use are always the same. Get aligned around something. Use data to do it. Once you get aligned around it, make sure you empower the people to go out there and make sure they've got a good plan and then hold 'em accountable to go do it and do regular reviews.

The monitoring that are coming in and out with that. And you know what happens with that? You start seeing things like investments go back  into the companies, the company grows and jobs get better and people make more and more money. Morale goes up. It's a huge difference that it, that you make in people's lives by coming in and just focusing on the critical few things, making sure your people are trained for it.

And then giving them the power that they can make those dec decisions. Creating a safe zone where they're comfortable failing, right? Because if you are afraid to fail that , one failure now people, they can't handle it. It's too much pressure. You gotta have these steps and places that people can come in, try, see what works, and then, , keep getting better day in, day out.

So it made a huge difference for that one business and , we have dozens of those stories. 

Richie Cotton: That's brilliant. I love that. Just doing the basics, , and , using data to figure out what are the basics you should be doing. That's the difference between having a viable business and not having a viable business.

So it just seemed incredibly important. It's, it is a very nice story. , Now I have to say, I'm very impressed that we've got through this whole podcast, , all about panicking and businesses and not talking about the Hitchhiker's Guide to the Galaxy, which so  famously has, don't panic on its cover. So I think we're very well.

Bill Canady: Well, the one thing they told us, what's the most important, , , thing , in the uniform? Oh, you remember the number? , 

Richie Cotton: 42. Of course. 42. There you go. , That's all we're looking for right there. So, 

Bill Canady: , I love that book. I remember the first time I read it, which, geez, I was, it's probably 30 years ago or so.

It's been around forever. , And I thought, I just discovered some magic manual to the universe. You, I was reading all that, but there's, there is a lot of wisdom in, in that book about, , being open to, , ideas, trying things and trying to figure out the secret to the universe. And I think that, , we each have , , , our own secret, and it's.

About treating people with dignity and respect. Get creating a safe environment where they can excel. I, I have these four things I call the four Commandments that I believe you can run any business with. ? And these are in no particular order, , so the first one is be data driven.

You and I have talked about it, , if you have less than 20%. Of the information, you're just probably guessing if you have more than 80% of the information, you probably waited so long to get  that much that everyone else has passed you. You gotta be willing to live in that ambiguity. Live in the gray between those numbers because it's always changing.

The second one is be on pace. Don't be too fast. Don't leave everyone behind. Don't be too slow. Don't be a bottleneck with, there's a right pace. You have to go to keep everyone together and get successful with it. , Be , or no surprises. No one likes surprises, right? Because they're generally bad.

So. Bad news, relatives and fish all stink after three days. So make sure people know what's happening. Don't kill the messenger. Make it a place where people can come and tell you so you can do something about while you have time. And then the final one I actually think is the most important, and that is results matter.

We will not be a best efforts company. We actually have to have success. , , if we're gonna keep in the game because no, it doesn't matter how hard we try, we're in the game that we have to win some , and, , so this is an exciting place to be. These are exciting things to do. If you take those four principles, you can lead any company out there because people will understand what your intent is.

We're trying to do better for everyone.  

Richie Cotton: Magnificent outta it. , Four principles, , all sounds like good advice. Yeah, I do like that joke about, , yeah. , Bad news, relatives and, , fish all sticking up for three days. Very funny. , Nice. Okay. , Thank you so much for your time, bill. , It's great chatting with you.

Thank you, rich. This was great. Thanks for having me on there. Have a great day now.