A quick story before we jump into the man of the hour here Dana that kind of clarifies how I think about what we do here at Steelhead my childhood friend and I named Johnny spent the last week in the Rocky Mountains and we were chasing out with a bow and arrow and this sounds extremely primitive using a bow and arrow going up and down the mountains chasing after an animal I can tell you it was extremely primitive and we're going back in time to like the Daniel
Boon and Dave Crockett days Johnny and I would have St because we don't have the skills we live in an office right we don't have the skills to track and and find animals and be hyper proficient with with these primitive tools but what Johnny and I had was boots that were handcrafted in Italy that were just like stiff as a mountain goats angle and Marino base layers that stay warm when they're wet we have laser range finders that use the speed of light and time to give us distance and compound bows
that use cams that fire like an engine to maintain the most kinetic energy possible and binoculars that take the human eye times the power of 10 you can see an animal miles away and this is all to say we have the best technology in the world Johnny and I and that's the reason a couple of office guys can be successful in the mountains that's what excites us most about steel head is the common folk the manufacturing job shops of America can achieve uncommon results so whether it is to have a generational
business for your family whether it is to retire and go travel the world or whatever your dreams are that's why why Steelhead exists so you can work smarter and not just harder to get to where you want to go and think who we have here today is the living embodiment of the American dream and Mr Mr Dana thank you Dean for that introduction glad to be here proud to be invited to speak to this group I'm told I'm not here to speak about steelhead but speak about Dana and Kathy Schnepft and D&K powder coating
so we'll do the best we can absolutely so so Dana just to gu kicked off here could you describe kind of how you grew up and where you came from a little bit of my history grew up family of five children my father was a union construction electrician my mother was a stay-at-home mom I started out my career in the union electrical industry followed my father my uncle and my brother did 25 years in the construction while I did that it seemed like every day I went to work I tried to find additional ways
to make income and other other things to do to grow and help our family out we got involved in single family homes that we purchased and rented and remodeled and sold got into the car wash business which my parents owned a car wash when I was in high school and I always enjoyed doing the work on it my wife was an Electronics technician worked in a manufacturing facility worked on the side on nights and got her degree to do electrical Tech electronic technician and then at the same time we grew Car
Wash business kind of got out of the rental house business and eventually got into Mini Storage which now my wife does full-time had a very successful business and then we were doing the mini storage and car washes and I had a friend that I had helped get into the auto body business that went through a hard time bankruptcy divorce and he actually went to work for one of his customers that was starting a powdercoat business Todd worked for them for 13 years and eventually got run out the owner brought
his daughter and some friends in and wasn't working out with Todd so he went back and was doing Auto Body on the side and he kept talking to me about powder coating and he said this is a great business you got to get into it it's like having a printing press in the back room printing $100 bills it's so it's so easy I wasn't that comfortable with it I was at a point in my life where we were doing well with our other businesses so I fought it for a long time and one day Todd come to me with a business
plan that had it all spelled out down to the penny what we were going to spend and what we were going to be able to make and how it was going to work Todd was going to do all the work in the shop and I was going to run the books so I decided this this could work let's look at this our plan was to be me and Todd for the first two years and the third year we're going to hire a part-time employee and the fourth year we were going to be big shots we were going to have a full-time employee working for
us so got together and we found a place to rent finally got a business loan and ordered the equipment looked like it was going to be 2 months to 10 weeks out before we could get the equipment so Todd started working in the plant building racks and stuff and getting things ready for production interest exploded on us within a month there was so much interest I said I can't do this book work by myself I'm going to have to hire a secretary so I decided to hire the secretary to work part-time for me
and part-time for Kathy and before we got opened there was so much more interest that I hired the secretary full-time and we hired four or five full-time production employees business has been explosive the growth has sometimes been painful 11 years in have 60 employees work two shifts generate about 8 million a year in Revenue have a lot of fun so Dana in those early days how are you managing orders customer relations sales invoices Etc I good help secretary you know generating the invoice and
we had a we called our sales out those really project managers because we've never really done any sales marketing or advertising the business has just really grown itself we built the business on quality and I've never had to apologize for that some of it was a struggle we took in all the work we could did the best we could to price it as time grew I had a p&l every month I knew how much money we were making or losing but nobody knew where they didn't know if we were making money on individual
projects or customers or losing and it was very challenging and I had looked at hiring someone to sit next to me and do time studies on employees and get me data and actually at about that same time Dean walked into our office I don't know how but he made it through the front office and actually got to talk to some people that were interested in it and it's really transformed our business from a marginally profitable business to a very profitable business yeah so I guess Dana going back to those
early years in the I i' say the founding years I was like you started the business in 10 years ago 2013 11 years ago 11 years so in the early years when it came to job selection or you know dealing with bad jobs I mean you said you got a big loan from from the banker was there any issues there in regards to making ends meet a lot of challenges throughout the years making ends meet in a lot of the businesses but we've always worked through it Kathy had a retail business packaging shipping and rubber
art stamp business was doing close to a million dollars a year and then 911 come along changed this country forever sorry it almost bankrupt us we worked through it we were advised to file bankruptcy we didn't it's been challenging but we're very strong very thankful for where we are today sorry one of the foundational values that steel had is great I'd say Dane on the team his leadership team are the living involment of just doing the hard things when the hard things are extremely hard nights weekends
Andy mentioned 7 days a week to keep the lights on type of thing for nine years and ID say when we first met Dana this was probably two and a half or three years ago and walked through the front door steel out was in a place where we were extremely young and probably I me we had one beta customer in the up of Michigan with a couple people but Dana was our first legitimate customer and at the time Mark here had work orders built but it was pretty much just work orders and Steelhead at large was just
an idea the best part was we believed in it and Dana believed in it the number one thing that he wanted was job costing and we had it technically in the database but it actually wasn't like visible so I think a huge credit goes to Dana our company had don't think we'd be here today without him believing what he couldn't even see and yeah I think the the start of our relationship was completely due to due to his belief his firm belief that when you know the numbers and you can actually abide by the
Numbers it'll it'll change change the business outcome so I guess the end of the first question for you is when we walked in that day I think it was January or maybe December of 2021 what was the team's reaction versus is your reaction to a new way of life I certainly had some push back my son was General Manager he's the biggest skeptic ever and he seen some possibility on this but I thought there was going to be a lot of work involved my plant manager talked about MRP and Erp systems he said you
can look at spending a million to2 millionar to get in and he said we're going to have to do it someday we weren't ready Dean come in and virtually got us into this system for almost nothing it was so easy for us we knew they were new they were developing their system U wanted to grow with us wanted us to help them grow and design their system to work for powder coaters and plers and painting shops job shops and we we just had a great relationship to grow both businesses together and now Andy mentioned
earlier I think like a huge takeway for for all of our customers here today is operational discipline the getting the people to properly put in their their times and and use the system properly so the leadership team can make adjustments and you kind of steer the ship towards the profitable customers for profitable jobs but it's extremely hard to do to get the whole team on board down to every operator on first shift second shift and Beyond so how did you guys get all the operators on board it was
a struggle we really didn't make it an option you were either going to get on board you were going to do this or you weren't going to work for us that's how it worked we believed in it we've seen the value of it it did take take some time to get everybody involved participating within four to 6 months we were able to learn a lot and make huge changes on determining where we were making money and where we weren't we we got some real eye openening experiences out of the data can you explain those
experiences one of the things we found with had customers that we didn't feel we were making any money really considered letting them go got steel head data and they were 30 to 35% margin nobody in the plant knew it they're my new best friends we we just didn't know it we thought we weren't doing well on some small prototype walk-in work oneof we didn't realize we were losing hundreds if not thousands of dollars in every one of them jobs we had to develop minimums and we had to start turning away
some work that we had previously done that wasn't working for us we had some large items big heavy products that we didn't know if we were making money on thought maybe we were doing okay found out some of that had 60 and 70% margin nobody knew these were were huge to our business we took took something that was marginally profitable and turned it into something that has huge margins we do lot less work and make a lot more money it's the American dream really so the financials are a key piece what
go with the operator adjustments that you guys have made based on the data from the time it takes to cre you know for like operator a to complete part A versus operator B to complete part A what have you guys learned there another thing we learned off of it is for example a taping and plugging process we found out one operator might take 3 minutes to complete that function and somebody else might take 13 14 15 minutes and it's not necessarily that the person that was taking the longer time was not
doing their job or not doing it properly it's just some people were more efficient so we've used it a lot to reassign and how we use our people of where they're efficient and what your best staff DNK powder Supply some of the largest I'd say Fortune 100 companies or manufacturers in the US how do you handle price increases or negotiations on price with these public companies we've had a number of price increases we feel Justified when we have data that shows what our inputs and expenses are and
we haven't had a lot of push back with it if that's what it costs to do it we we seem and you have that data they seem to be willing to pay it the business was built on quality not pricing we can be beat on pricing but nobody can take our quality away and we don't have to apologize usually for our pricing do you guys still do blanket price increases we did quite a few during Co probably not so much blanket price increases anymore it's more based on margins what's next for Dana and Cathy schn for
Dana and Kathy we are at actually in process of selling part of the business to our key employees eventually looking at selling out to an Equity Firm we've been approached a number of times I had somewhat of an opportunity a year ago to sell out they made me an offer and then started negotiating and I kind of sent them packing I see there was about 50 million sitting on the table in the next 5 years and was willing to let them have it but wasn't going to get beat up and at the same time I kind of
figured out mentally I was not ready to retire I'm wired to work we've worked 80 to 100 hours a week for 40 years love it enjoy it trying to slow down was tough tough to do but we're working at it we just built a new facility was intended to be a warehouse eventually to be added on to for Media Blasting and burnoff but we decided to actually put burnoff in this Warehouse as it was being built rebuilt it to was B and utilities for the burnoff and ordered equipment so we're trying to expand into that
part of the business it's something unknown that we're going to learn about but trying to grow that we have two more pieces of property both adjacent to us for future expansions we feel we haven't hardly touched the capacity in the market there's just so much to be had and like I said we've never done any sales marketing or advertising we've grown probably an average of 30% a year in 17 18 and 19 we actually tripled the business it was kind of painful to have all the infrastructure employees and
grow through that in my life I've ran into a couple people that have grown their business so fast that they went bankrupts and I could never understand it they look like very successful businesses I have a better understanding of it now it's it's difficult to grow fast yeah we've done it it's it's tough and on the on the exit plan or the valuation of the company I think we we'll get into more of that later today with a few keynote speakers but how has the margin data affected what the market will
pay for D it's a huge impact like you said when prior to having Steelhead we were made a little bit of profit the had grown the business continued to grow it the profits were not there now with profits it's had a great impact on the value of the business and will continue to as we grow I found out that there's really one number that Equity firms are interested in and it's evida and we're working on it we spend a lot of money to expand we're growing it but we we've got a pretty good idea what the
value is based on offer we've made and the growth that we've seen and how it affects the earnings and I'd say the the last thing is I was just down there this summer at at DNK and they're putting up record months buildings getting built out back and and the lights are pretty bright bright over there but in in Andy's presentation we just saw manufacturing this year is a little bit down in the US so how have you guys persevered through maybe a little tougher economic conditions to have your your best
year ever we're actually aware of it you know we talked to a lot of our of it you know we talked to a lot of our of it you know we talked to a lot of our suppliers and competitors and it's pretty flat out there at best in this election year and with the interest rates being up and stuff we've just continued to do the things that we're good at and have grown we feel very fortunate to be up 35% this year got some good stuff coming down the pipeline that's going to get even better awesome well Dana
thanks for the for the story and and we're we're pretty proud to serve you guys and all the customers here any questions Andrew others for Dana or myself Dana mentioned about growth being one challenge can you dive into that a little bit deeper what were some of those obstacles in that graphic growth the biggest obstacle for us was probably financing getting money for operations and to be able to grow we we felt we were fairly successful we spent a lot of energy and money on management we've always
been a little heavy on management all the way through which has allowed us to grow to just be able to hire manufacturing when when you've got the management plate was difficult and always the logistics are putting everything together the help the supplies making it all work and grow at the same time but the the money and the financing was probably the most difficult I can say since we've been in our new building in the last 10 years three times I've had to hand the keys to the bank I'm not real
proud of it but we were trying to grow we're working really hard and we were successful and they got to the point where they're like you're as deep as you can go we can't do it anymore so I handed them the keys and said here you go I'm not going to work tomorrow I'm not going to pay my suppliers I'm not going to not pay my help you can do it and actually in them times we deal with a small Community Bank and I believe the owner of the bank kicked in his private retirement money to finance us we're
very grateful for that their true partner a big part of our success you mentioned that you were finding some jobs as good margins that you weren't aware of where were you finding those margins was it in your material usage or your labor and how did Steelhead help you find that the whole everything the probably the labor more than anything but we we were able to identify it with Steelhead by tracking the time yes absolutely with having all the employees signed into it we knew exactly what what the
cost and inputs were on the labor we you know we knew our material cost prior to that but did not know the labor costs do you use primarily batch production systems or conveyorized systems we do it's all batch it's all batch we we've had suppliers train tuck us into conveyorized system we just don't see it we've said show us a system that works for us run multiple colors multiple sizes we run anything from size of a pen to one piece to go on a semi and we have a lot piece to go on a semi and we
have a lot piece to go on a semi and we have a lot of custom fixturing for smaller items we might have a rack with 200 Parts on it we may have 10 of them racks and we feel we can basically create a conveyorized system in our bat shop and run it continuous and be more efficient we have area for cool down and QA and packaging and take that stuff and run it back through we feel more efficient than you could even with a line we could be wrong and wait for somebody to educate us but we we just don't
see the benefit of a line I really like to know if you did any research with your operators that were there before Steelhead came in and see how they feel they were affected and if their job improved and how they felt about it I'd have to say we have huge support for it everybody knows our productivity and profitability has increased so much that right right now there is huge support some of the biggest critics were sales and project managers saying how much additional work was going to be involved
to import this data and keep track of everything and now they're the largest supporters of it we almost feel guilty when we bid work it's like we're stealing we feel like we got Insider information and those that that comes from the people that were the biggest critics but that it's made their job so easy and it's fun when you're making profits one story I had heard out of DNK was a case where lot size had a big impact on margin so a lot size of 50 it was hard to hard to make it but at 200 it was
it was good work and for your customer that was not really a big deal to send a big lot size so you were able to just arrive at that just working smarter with the the same resources so you have any more cool stories like that and how do your customers respond to to you telling them hey our Erp tell is telling us that 200 is a lot better for us what can you do every item's different yes we do use that a lot sometimes we go back to the customers that are going to send smaller orders and explain to
them if you do in a larger volume we can do it for less money sometimes it works for them sometimes it don't but yes we do we do look at that we are constantly looking at it efficiencies and what works best for us that we can help the customer out that's the ultimate goal I just want to thank steelhead for having us here God Bless America thank you God for putting us here thank you for hooking us up with Steelhead it's it's been huge for us I probably sound like a Salesman for Steelhead I'm not
I'm not compensated but it has made our business very profitable and and put us in a great financial position for retirement thank you