Latest / Financial Survival Network / Metal Fab: Turning Rust to Gold - Jules Brenner #6155

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Metal Fab: Turning Rust to Gold - Jules Brenner #6155 · Financial Survival Network

• 0:00
  Speaker 1: Yeah, it's kind of interesting because our kind of equivalent
• 0:03
  Speaker 1: of that is, like the US is going through I
• 0:05
  Speaker 1: would say I'm manufacturing resurgence. I think COVID has shown
• 0:08
  Speaker 1: them that, like A, we can't have so much dependency
• 0:10
  Speaker 1: on other countries industries like aerospace and events. Fundamentally, they
• 0:14
  Speaker 1: can't make stuff in most countries. They can't send stuff
• 0:17
  Speaker 1: to China or Mexico and for certain products. And then
• 0:20
  Speaker 1: on top of that, like you know, the US typically
• 0:23
  Speaker 1: wants to invest locally, especially when they feel like the
• 0:25
  Speaker 1: economy is downe. So I'm a lot more mandates now
• 0:28
  Speaker 1: for made in America products.
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  Speaker 2: You are listening to Carrie.
• 0:31
  Speaker 3: Let'sa's Financial Survival Network where you get valuable information you
• 0:35
  Speaker 3: just can't find anywhere else to thrive in today's trying times.
• 0:39
  Speaker 3: You need the Financial Survival Network now more than ever.
• 0:44
  Speaker 3: Go to Financial Survivalnetwork dot com and get your free
• 0:48
  Speaker 3: newsletter and gift. Financial Survival Network now more than ever.
• 0:57
  Speaker 4: And welcome you are listening to and watching the Financial
• 1:00
  Speaker 4: Survival Network. I'm your host, Carrie Lutz. Well, just when
• 1:04
  Speaker 4: you thought the rust belt was finally finished, along comes
• 1:07
  Speaker 4: Jewles Brenner. He's been taking these old rust built type
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  Speaker 4: companies bringing him into the modern world, recapitalizing him, investing
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  Speaker 4: in technology. He's going to tell you all about it, Jules.
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  Speaker 4: Thank you for being on the show. So, hey, it's
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  Speaker 4: kind of an interesting concept to find value in the
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  Speaker 4: Ross belt. How long you've been doing it for?
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  Speaker 2: Heyay, thanks for having me.
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  Speaker 1: We're gone on our fifth year now. So we started
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  Speaker 1: during COVID and you know we have been not gone
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  Speaker 1: on ever since.
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  Speaker 4: All right, so give us an idea. What kind of
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  Speaker 4: companies are you are you acquiring taking over?
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  Speaker 1: Yeah, so our main vision for our business was to
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  Speaker 1: kind of look at the industrials pretty broadly. I think
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  Speaker 1: the industrial economy in general is a very typically tech
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  Speaker 1: under invested segment.
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  Speaker 2: A lot of children don't want.
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  Speaker 1: Those kinds of companies these days of parents have been
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  Speaker 1: running every years of grandparents, and you know, there's a
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  Speaker 1: lot of different opportunities to get into. You know, we
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  Speaker 1: found our first initial footing in the metal fabrication sector,
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  Speaker 1: particularly in California. When I talk about metal fabrication, think
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  Speaker 1: like welding shops and machine shops. You know, anyone taking
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  Speaker 1: metal and making custom shapes at it for customers. Typically
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  Speaker 1: business to business, equipment, manufacturers, construction, et cetera. And you
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  Speaker 1: know this sector of the economy, especially with companies call
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  Speaker 1: it fifty employees you're down. There's thousands of them in California,
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  Speaker 1: but also a lot of them unfortunately shut down, you know,
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  Speaker 1: because kids don't want them, and then they never really
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  Speaker 1: leverage modern tools to get to scale. So that's been
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  Speaker 1: the current focus and will be for the next few years.
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  Speaker 1: All right, So, I sorry, how many companies you've you
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  Speaker 1: acquired to day?
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  Speaker 2: So we've about three and then in California alone there's
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  Speaker 2: about six thousand of them, just metal fabrication businesses.
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  Speaker 4: And they're all companies with no direct or clear line
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  Speaker 4: of succession and basically the kids don't want them for
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  Speaker 4: whatever reasons, and so there's opportunity there. You're doing owner financing,
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  Speaker 4: Are you getting bank loans or investor financing? How do
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  Speaker 4: you do it?
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  Speaker 2: Yeah?
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  Speaker 1: And I would say many of them are you know,
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  Speaker 1: like manufacturing for you know, kind of children succeeding their
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  Speaker 1: parents is a lot more popular in the Midwest maybe
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  Speaker 1: or different markets of the US, but really not in California.
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  Speaker 1: And everyone's trying to be a software engineer or something
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  Speaker 1: out of here, but yeah, a lot of them out
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  Speaker 1: there and then on. You know, when we started, our
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  Speaker 1: goal was to do a permanent hole model. So we
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  Speaker 1: didn't want to start out and be like a private
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  Speaker 1: equity group where we to raise a fund and then
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  Speaker 1: the fund would force us to you know, sell it
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  Speaker 1: in five to seven years. So we didn't think that
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  Speaker 1: was you know, the appropriate strategy. We wanted to do
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  Speaker 1: more long term investing. So what we did was we
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  Speaker 1: use banks predominantly. You know, a lot of our sellers
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  Speaker 1: they you know, want to have seller financing involved, sometimes
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  Speaker 1: for tax purvices, sometimes because it gets them a higher
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  Speaker 1: total price. And then we bring in equity ourselves, mostly
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  Speaker 1: from our balance sheet from the existing businesses that we own,
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  Speaker 1: as well some minority investors that we you know have
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  Speaker 1: like minded and brought into the foal as well.
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  Speaker 4: Gotcha all right, So to tell us, how how has
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  Speaker 4: it been going? Companies doing well?
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  Speaker 2: Yeah, company has been doing well.
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  Speaker 1: We started with a business initially in the infrastructure side.
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  Speaker 1: It predominantly like custom parts for roads, bridges, and highways
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  Speaker 1: in California. That was quite interesting for the first year
• 4:24
  Speaker 1: or two that we operated that on and sewing, and
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  Speaker 1: then at the end of last year, we brought two
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  Speaker 1: more businesses that were like five minutes from us that
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  Speaker 1: brought us into like electronic enclosure industries as well as
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  Speaker 1: water treatment.
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  Speaker 2: So you know, we love that.
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  Speaker 1: It's been a lot of fun to you know, look
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  Speaker 1: at segments of the economy that you knew where someone
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  Speaker 1: was making stuff for, but it's you know, you didn't
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  Speaker 1: really know what it was like.
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  Speaker 2: So getting into that has been really exciting.
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  Speaker 1: And for the next like six months, our goal is
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  Speaker 1: to get into aerospace and defense as well through both
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  Speaker 1: purchasing in business and bringing some of that in organically.
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  Speaker 4: Interesting. Interesting So you like aerospace, are there other particular
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  Speaker 4: markets you like?
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  Speaker 1: Yeah, I think, you know, we want to play to
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  Speaker 1: what's successful in California. There are certain things like let's
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  Speaker 1: say you're making like automotive parts. You know, there are
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  Speaker 1: pockets of California what that may make sense for like
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  Speaker 1: making things for maybe at Tesla or like a Ribbean
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  Speaker 1: electric vehicles. But after that, a lot of that stuff
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  Speaker 1: just makes a lot more sense in the Midwest. In California,
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  Speaker 1: it's predominantly and historically an aerospace and defense hub. Water
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  Speaker 1: treatment they call water the new goal that here there's
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  Speaker 1: all the droughts to trying to create all this equipment
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  Speaker 1: to treat water infrastructure. This is the largest infrastructure market
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  Speaker 1: in the country, so it's been popular. Aybriculture is actually
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  Speaker 1: also pretty popular here, especially at Central Valley, as well
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  Speaker 1: as semi conductors and metical equipment, and we don't really
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  Speaker 1: do much for any of those. We like aerospace and
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  Speaker 1: defense because we are seeing just an influx of that work.
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  Speaker 1: Every shop in our business campus that isn't that as
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  Speaker 1: a metal shop is actually pretty much slammed at this
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  Speaker 1: point with aerospace and defense works.
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  Speaker 2: So we think for the next few years it will
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  Speaker 2: be a good place to start.
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  Speaker 4: That's funny because these are what I would call boring businesses,
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  Speaker 4: although to me, no business is really boring. Maybe no
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  Speaker 4: boring business is one that you don't have to do
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  Speaker 4: anything in The money just pours in and you kind
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  Speaker 4: of sit back and do nothing. But how many of
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  Speaker 4: those are there? So they're really not glamorous, they're not sexy, right,
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  Speaker 4: And yet these businesses are highly profitable, right, big margins,
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  Speaker 4: and when you bring in the efficiencies like I'll give you.
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  Speaker 4: For instance, here there's a dry cleaner around the corner
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  Speaker 4: from me and it's elderly Indian as then from India couple,
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  Speaker 4: and they still write out the slips by hand. The
• 6:44
  Speaker 4: biggest accomplishment was that they got a credit card reader
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  Speaker 4: that actually took Apple then, you know, and I look
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  Speaker 4: at it, and they actually do the actual cleaning on
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  Speaker 4: the premises, and I look at it, and it's like
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  Speaker 4: I want to say, like, why why aren't you using
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  Speaker 4: like computers? Why do we have this here? And like
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  Speaker 4: they don't barcode all the clothes the way the newer
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  Speaker 4: dry cleaners do. And I'm thinking, you know, it's a
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  Speaker 4: real opportunity for somebody. They're elderly, their kids probably don't
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  Speaker 4: want to do it because I've never seen their kids.
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  Speaker 4: There probably a great opportunity for somebody. Yeah.
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  Speaker 1: Yeah, it's interesting because some of those businesses, you know,
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  Speaker 1: if the kids don't help the parents push technology. You know,
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  Speaker 1: the parents typically we see most of our sellers like
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  Speaker 1: fifty five and upper age and a lot of those
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  Speaker 1: guys they've been doing things a certain way for decades,
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  Speaker 1: so they don't particularly want to change, So the kids
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  Speaker 1: aren't qushing change. It's pretty hard to give the business
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  Speaker 1: to do all those things. So sometimes it's either, like
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  Speaker 1: you said, easier to start from scratch or you have
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  Speaker 1: to buy it and kind of do it yourself. But
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  Speaker 1: they probably do have a nice recurring list of clientile
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  Speaker 1: that is worth something over you know, buying to the
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  Speaker 1: bus starting something from zero.
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  Speaker 4: Yeah, Like I go there because it's honestly, they do
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  Speaker 4: a good job. All the years have been going only
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  Speaker 4: one time if they something up and they fixed it,
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  Speaker 4: and it's cheaper because you know, everything's paid for it. Sure,
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  Speaker 4: all the equipment's probably falling apart as we speak, but
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  Speaker 4: they do a decent job and it's cheaper, and they're
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  Speaker 4: nice people. You know, they're nice people. But they like
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  Speaker 4: when I see them take out the pen and they
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  Speaker 4: have they can't just do one slip, Jiles. I got
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  Speaker 4: to do two slips, one for the laundry, one for
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  Speaker 4: the dry cleaning. So it's like I just look at
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  Speaker 4: that and it's like, hey, I'll bet there's an app
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  Speaker 4: for an iPhone that you could do this on and
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  Speaker 4: it would take care of everything. But you know, it's
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  Speaker 4: not my business. They didn't ask me, and I'm not
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  Speaker 4: volunteering it, but I just so would like to ask them,
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  Speaker 4: why are you doing it? I'm sure you encounter that
• 8:49
  Speaker 4: situation all the time.
• 8:51
  Speaker 1: Yeah, it's kind of interesting because our kind of equivalent
• 8:54
  Speaker 1: of that is, like the US is going through I
• 8:56
  Speaker 1: would say, I'm manufacturing resurgence. I think COVID has shown
• 8:59
  Speaker 1: them like a, we can't have so much dependency on
• 9:02
  Speaker 1: other countries industries like aerospace and events. Fundamentally, they can't
• 9:05
  Speaker 1: make stuff in moost countries, they can't send stuff to
• 9:08
  Speaker 1: China or Mexico and for certain products. And then on
• 9:11
  Speaker 1: top of that, like you know, the US typically wants
• 9:14
  Speaker 1: to invest locally, especially when they feel like the economy
• 9:16
  Speaker 1: is down. So there's a lot more mandates now for
• 9:19
  Speaker 1: made in America products. But what's happening is our customers
• 9:22
  Speaker 1: are themselves in growth mode, and eventually, like if you
• 9:26
  Speaker 1: have a customer and growth mode with a supplier that's
• 9:28
  Speaker 1: not keeping up, eventually that customers going to have to
• 9:30
  Speaker 1: go somewhere else or move work to a different location
• 9:32
  Speaker 1: or whatever it is. So I think like our customers
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  Speaker 1: are forcing us to make some of these tech changes
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  Speaker 1: and some of these quality changes that maybe you don't
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  Speaker 1: have to do so much in certain industries because you
• 9:42
  Speaker 1: know those and those industries aren't growing as much.
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  Speaker 4: Yeah, so you're basically your game plan here is do
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  Speaker 4: a roll up. Keep acquiring these metal fabricators, put them
• 9:52
  Speaker 4: under one banner, bring efficiencies to them, bring new technology.
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  Speaker 4: And it's interesting because I'm sure a lot of the
• 10:00
  Speaker 4: these guys been there doing this twenty thirty years. They're
• 10:02
  Speaker 4: probably really good at their jobs.
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  Speaker 2: Yeah.
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  Speaker 1: Yeah, it's you know, there's a lot of owners that
• 10:08
  Speaker 1: are like kind of general managers of these businesses, and
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  Speaker 1: we typically see like, you know, a lot of difficulty
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  Speaker 1: in them selling them as finding someone who can replace them.
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  Speaker 2: And the truth.
• 10:17
  Speaker 1: Of the matter is very hard to replace somebody who's
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  Speaker 1: been doing a lot of different things really well for decades.
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  Speaker 1: But it's a lot easier to replace them if you
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  Speaker 1: have like middle managers that specifically, you know, just purchase material,
• 10:27
  Speaker 1: just schedule, just do production, whatever, and you spread the owner's.
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  Speaker 2: Workload across them.
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  Speaker 1: So part of our strategies have the middle managers get
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  Speaker 1: those owners' businesses, bring them in and spread them across
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  Speaker 1: those That actually makes the transition smooth. But then the
• 10:40
  Speaker 1: other thing that's happening is like California, he gets a
• 10:42
  Speaker 1: pretty bad rap for you know, being hard to do
• 10:45
  Speaker 1: business in which I actually completely agree with. I think
• 10:48
  Speaker 1: it's very expensive to hire an employee for the office
• 10:50
  Speaker 1: and kind of do any of those things that it
• 10:52
  Speaker 1: will help you as a business owner scale And part
• 10:55
  Speaker 1: of the model here is if you can get to
• 10:57
  Speaker 1: scale and bring businesses together, not only do you diverse
• 11:00
  Speaker 1: revenue streams and spread workload across multiple people so it's
• 11:03
  Speaker 1: not all depend on one owner, but the actual the
• 11:06
  Speaker 1: California difficulty of doing business actually ends up becoming a
• 11:09
  Speaker 1: mote for you where it's very hard for mom and
• 11:11
  Speaker 1: pop to continue to compete with someone that's bigger because
• 11:15
  Speaker 1: you know, you just don't have the resources to it.
• 11:17
  Speaker 1: In customers, if they're growing, they're going to, you know,
• 11:19
  Speaker 1: increasingly want to move work to someone who has more
• 11:21
  Speaker 1: infrastructure built up internally to handle it. So I think
• 11:24
  Speaker 1: that's very important to our strategies, Like as you scale,
• 11:27
  Speaker 1: you get like exponentially you know, stronger from a force
• 11:30
  Speaker 1: to you know, to do a business in California.
• 11:32
  Speaker 4: All right, Okay, well really interesting there, Hicks want to
• 11:36
  Speaker 4: find out more about you, connect with you on the web.
• 11:38
  Speaker 4: How do you do that?
• 11:39
  Speaker 1: So you can go to Industrial Succession dot com, which
• 11:42
  Speaker 1: is our main hold Cone. If you want to learn
• 11:43
  Speaker 1: more about our metal orient and thesis, it's Metal Solutions
• 11:46
  Speaker 1: Holdings dot com. And we're always happy to talk to anyone,
• 11:49
  Speaker 1: whether it's enthusiasts in the space we've had, you know,
• 11:52
  Speaker 1: like my investors reach out, they'll want a partner with
• 11:54
  Speaker 1: us on some of the stuff.
• 11:55
  Speaker 2: In Nest we had brokers.
• 11:56
  Speaker 1: Sometimes people have owned the businesses themselves and are looking for,
• 11:59
  Speaker 1: you know, someone take them over.
• 12:00
  Speaker 2: Please feel free to reach out on any of those channels.
• 12:02
  Speaker 1: And it's just Jabrenner at on Industrial Subcession dot com.
• 12:06
  Speaker 4: For all right, excellent hey links in the show notes
• 12:09
  Speaker 4: to this interview on Financial Survival Network dot com. You
• 12:12
  Speaker 4: got a question with Jewels or myself, shoot me an
• 12:15
  Speaker 4: email kl at Carrie Lets dot com. And while you're
• 12:18
  Speaker 4: on the site, please sign up for a free newsletter.
• 12:21
  Speaker 4: A lot of great info there, a lot of helpful
• 12:23
  Speaker 4: info that I guarantee will make you money. Jewel's been
• 12:26
  Speaker 4: a pleasure. Good luck on your endeavor.
• 12:28
  Speaker 3: Hey key, thanks for listening to Carrie Let's this Financial
• 12:32
  Speaker 3: Survival Network your solution to today's trying times. For the latest,
• 12:37
  Speaker 3: go to Financial Survivalnetwork dot com. Financial Survival Network now
• 12:43
  Speaker 3: more than ever,