Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
The Mill #11 – CEOs How To Handle When Your Revenue Stream Dries Up
Hi everyone. I’m Taylor Poole with Rocky Mountain Forest Products. This is Shane Hoefer and Darren West, and this is today’s The Mill. So the topic for today is what happens when disruption occurs. And one of your primary revenue streams, this kind of came up. We had a distributor where they are losing some of their distribution rights to one of their primary products. And it just kinda got us talking about what does it look like when you lose a product line, your top client, maybe they shut down shop or they move, for industries that are heavy, heavily regulated. What happens when a law change occurs? Or any number of different things that can throw a wrench into a primary revenue stream of what that kind of looks like, how you talk to your team about it?
It kind of puts managers and owners and basically facilitators in a weird spot. So, I’m gonna pass it over to Shane to kind of have him give a little bit of context to it. And then we’ll just kind of dive in. What kind of context are you looking for here at Taylor? So throughout the history of Rocky, there’s probably been multiple things that have come up within our organization that revenue has shifted. And so part of the conversation we were having the other day that kind of facilitated the idea of what we’re talking about was more of when you get put between as a manager. When something changes outside of your control and you have to go talk to your guys, you’re in a tough spot, no matter what, and how do you make sure that you’re able to shift gears without losing too much buy-in or too much. They’ll need too much frustration within your organization.
I think the answer to that is twofold. The way I look at it first off the unforeseen is pretty much a given. There’s always going to be something that’s going to surprise you. So I think the first way that you combat a scenario like this is by not having all your eggs in one basket. I think ultimately the short answer to this whole video is it’s in diversification that you already implemented ahead of time.
But sometimes that catches you off guard. That’s an easy answer to say. So if you’re caught off guard, and all of a sudden you find yourself in this place, great. We can Monday morning quarterback all day long, but what are we really going to do? And so in that situation, my go-to is, this is now a mental war.
We are going to have to fight a mental war with everybody and address how everyone feels it’s going to be. In this situation, I talked to a particular person over at this distributor and he knew what was coming. He knew how his team was going to take it, that they were losing a major line, a line that would not be fast for them to replace.
And he was gonna have to go break that news to a sales team. That’s making commissions and getting bonuses based on having that line. And, I mean, that is tough in any position. And if I were in his situation, I mean, first and foremost, I mean, he started from the right place. He’s recognizing this is going to suck for his team.
So starting from a place of empathy and compassion, I’m like, man, this is going to suck. But before I had that conversation, before I went in there, there were some other things that we could talk about. Some other potential solutions which I’ve already thought about as ways that we can mitigate this.
It may not be pretty. I may say, hey, we’re going to mitigate this, but it might take us four months, six months or something like that. But whatever it is, let them know that we’ve got a plan, not just, hey, bad news. And I don’t know what the hell we’re going to do about it. That’s what I was going to say, chairman.
And as far as an owner’s response goes down to someone that helps with sales, it’s more than the team here, we’ve got 20 sales guys. They’re going to look more at how we react to it, and what we truly think of it, where we prepared as it freaked us out more so than, I mean, some of the newer guys might not exactly know what’s happening.
So if they see, well, no, this is what happened, but we’re ready for it. Welcome to our world. This is the building industry. I think then that’s how like you said, there’s the mental war. It’s just like anything you see your leader freak out. One that might not be a leader in two, that’s going to freak out your team just the same.
So it’s just like, wow. The owner just took a hit with one of his biggest lines. Say, if we did, I think everybody has their top line, diversification, like you talked about. So yeah, you want that top line? You just don’t want the huge gap for your number two line. So our top line comes to mind and I think, again, they’d be looking to the leaders, like, are they worried about it?
Cause that would freak me out. It would still freak me out. As long as I’ve worked with you, if Shane was panicking about some new twist of the month or a year for us, it would validate it just the same as you with the mental war. Like how we pitched this to our team validates. How we feel about it. So where are we? It’s like, here’s our opportunity, we don’t know what’s coming next, but man, I’m excited. I do need some help from you guys to figure out what’s next. That actually means a story. It was back when right after 9/11 happened and it was my dad that was still running the place at the time.
And I mean, there was a lot of panic nationwide for those of us that are old enough to really remember that, and the people were fearing recessions and war and everything else. And at that point in time, it was within two or three days of everything happening, I remember my dad gathering the whole company together at the time, which was small enough that we fit in everyone in this office. And basically just said, hey, even if a recession hits our slice of the pie is so small that we can still operate. If the market’s doing this, we only need to be down here. We can still maintain the point that as he was projecting strength, he wasn’t freaking out. He was saying to everybody, hey, you’re going to hear a bunch of stuff.
And there probably is going to be contraction and building, but it’s not going to affect us. And here’s why. And so that would probably be the first time that I learned at that point it was just an entry level sales guy of what it looked like to try to. The diversification aspect of this, your dad knew that, but you are going to be okay because of the fact of the niche products, the fact that even if the market did shift the part that’s going to shift the most is going to be the commodities market. And so because of the diversification and a specialized product, he knew that the company was going to be okay.
I think back to the point, they always say that every millionaire has seven sources of income, but from the different people that I’ve read about, they’ve had way more than seven sources of income coming in. Well, some have 40 to 50, if not hundreds. And so that way it’s like maybe one of them is their primary, but when it drops off, it’s no, we have enough of a base here that it’s going to flatline this.
We had earlier this year with all the new, different things going into Congress with some of the new regulations that were put on Facebook. I mean, we’re talking about multiple, multiple changes over about a year of new audience groups and all these different things that were set up in Facebook for us to market with.
And they were humming. And then after all these new regulations came down, we lost all of them. Now, not gonna lie. It’s been a nightmare trying to rebuild them. I’ve only got about 25% of them rebuilt in the last 90 days, but we have so many other things going on that it hasn’t really affected.
That’s kind of an interesting dynamic, what we’re going to say, just how it does correlate as well. Just the way we ask our guys to manage their account basis. So we do have our sales reps who have anywhere from 50 to 150 accounts that they’re in charge of.
They’re the one point of contact, right? And we’re just talking about this with Josh and fountain, our sales manager down there. It’s great. When you have accounts that produce and we have some very big ones here that for better or worse, make some sales guys comfortable. Well, they don’t always stick around forever and ever.
They get into another one. Josh, his example was he had a great deck builder get into basements making more money. You can’t blame the guy, but here’s the top account that just went. So it’s being aware that it might not last forever. So that’s where we’re always been looking for monster fences from 10 years ago, the guys that are getting started right now, we need to be aware of them just as the product lines.
So it’s like, all right, well, that’s great for us now, and it’s been a hell of a run, but if that gets polled, what’s the plan? And that’s where you just got to stay on the front of new products, new manufacturers. There’s very few products. If any, we stock that there’s only one place to get it.
So I think it’s just weird. You gotta be proactive without expecting something bad. Yeah. It makes me think of even a larger underlying principle. And that is just to learn from your mistakes. And I know about diversification, and I’m a believer in diversification because there’s been times when we haven’t diversified enough, when we learn things the hard way.
So I think about if someone’s watching this video and they’re like, okay, well, that’s great, but I didn’t diversify a year ago when I needed to and now I’m screwed. Okay, so you fight the battle and you get through this, but what are you going to do next time? How are you going to know? I think you can take it to a paranoid degree. Like you’re saying, like I was having a plan B, C, D E, but I think always having a rough idea of what you would do in any given situation. I think you just learned from that, I would be really curious to follow up with this particular guide that prompted this whole example in a couple of months and knowing.
He’s in an even tougher position, because it’s a corporate thing. He only has so much power to be in charge of that. But I would be really curious to see either himself or what corporate management decided to do. So like we don’t get stuck in this situation again, I think from an owner and this is kind of off on a rabbit trail, but from an owner’s standpoint too, you see who you’re dealing with. So say I got the call that something was gonna happen.
If it was the best move to call you, to be honest, just right away with a little bit of panic. To me, instead of like here’s what happened, here’s a plan now, that was pure relationship. And that’s why we have the relationships that we do, but it’s just kind of like, oh, he’s freaking out. Is there more to it?
That’s interesting because being on that phone call, that’s not how I really perceived it. I perceived it as because of the relationship. Can I talk to you a little bit about what maybe my plan B is going to be right. And I kind of want to get some feedback from you based on some of the things you tell me might shape how I’m going to go tell my team here a little bit.
Yeah. And so it wasn’t like, Aw man, shit, what am I going to do? It was more like, well, I got thrown a curveball. Here’s what I’m thinking. Here’s a rough idea. And there was one that maybe looked for some ideas from you as well. So that a little bit does he have some very rough unformed ideas of what he might want to do, wanted to see what my reaction as a customer would be to those.
So I didn’t see it as a moment of weakness. I saw it as when I said, man, if I got caught off guard, I had to come up with what a plan B is before I go and talk to everybody that I talked to in between those two moments right there. So he was still formulating that plan B. He was still getting ready to go out.
And project that strength to his team. I retract what I said based on that perspective. Cause then it is like, no, I’ve already talked to our largest account when I’m pitching them. And what he did is have a really good relationship with his largest account that he can have that candid conversation without freaking me out your cell phone and say, hey, this is the new cards that are dealt.
Yeah, no, I agree. I guess too, if he is in the name of wanting more information to explain it to the team as well. So I want to pose a question to you too, in a scenario like this from an internal cultural perspective, where is that fine line to where it’s projecting like strengths, but also being transparent.
Because to some degree, if you’re going to need to be able to give them enough of the information, but it could be if you give them too much of what’s going on, it could freak them out too bad. Like where does that find? There are certain things that could come up in a business where a little shift, like this could potentially bankrupt the County.
Right. And that’s where hopefully the machines that we’re talking about can handle a blow. I’ve thought about that too. But as far as being transparent and explaining it to the team, if it was here, it would be very cut and dry there’s new cards. We were dealt with who’s ready to get to work and we’d brainstorm it.
We’d get our ACEs in a room and the ideas I’ve heard of this, I’ve heard of that. We would brainstorm it and it’s an uncontrollable change. And that goes back to like good old anything, you can’t get too pissed off over stuff. You can’t change, rubs zero control over, but you can react to it.
So for us, If we were in this particular situation, which we very well could be someday, it’d be, hey, this is exactly what happened. I just found out about it. I wouldn’t let it sit for a while and I’d get to work. And then you’d find out just like I said, you’d find out how your managers would react.
We’d find out how our sales team would react, but it would be hit with like, here’s our next challenge. Let’s go. Okay. All right. So most of my answers to that question are a little different, the question being there’s always some inherent risk in here. How much do you pitch the new idea versus how much do you tell really what the full amount of risk is?
Yeah, my instinct is to lean way towards transparency, but I mean, there’s inherent risk in everything we do in business. If I went out there and was constantly communicating every potential pitfall that could be followed by the business, that’s terrible for morale. And I think most people understand that risk exists.
So how do I determine what that balancing act is for me? My test is how do I feel about what I did when I lay in bed at night? Do I feel like I was being disingenuous and these bands, if I were? If I were pitching something as all roses or it’s going to be okay, and I’m really thinking, oh man, all these people may lose their job and they should make plans accordingly.
I’m not going to feel good at night. So I couldn’t pitch it to Rosie. Yeah. But if there is, if there’s more way more upside and there is a little bit of risk and I get everyone focused on the upside, I think that’s leading towards success. We focus on winning, not all the potential ways we could lose.
If we focus on losing, you’re going to get losses. But for me, sitting with myself at night because at the end of the day, I just got to live with myself with all of these things. So it’s hard to quantify. It’s a giant gray area, but I think about those things and tough decisions all the time.
I had my Rocky Mountain blinders on thinking like, okay, the particular line that we that’s our number one. If I had to pitch that to them, how would we handle it, versus when you do have a different company, it has all your eggs in one basket and then it truly could go bankrupt. You will then not say, yeah, that’s a whole new speech.
Yeah. Like I’m thinking if a contractor has 80% of all of his business with a particular builder or track home builder or something like that. And when that relationship gets in trouble, that owner is probably still going to have a job, but how many of his employees are there? Is he going to have to let them go?
And that would be a different scenario. Absolutely. And that’s where I think that’s why we’ve talked about in the middle of getting more and more people in here from all across all different, the spectrum of our industry. And I think that’s really important because there’s a lot of things that we don’t face like that we’re so diversified.
We haven’t really faced the fact that if we lost a line overnight, it would be a pain in the butt and people might be disappointed, but it’s not going to kill us. It’s not going to really hurt us. But there’s a lot of companies out there in this industry that are building their empire, that they find this as a real situation and contractors, for them, it might not be a product line, but it might be you gotta go tell your crew.
You can’t keep them busy through the winter. Or they did lose that big account that kept them busy. And then they got to go tell her guys, try to stick with me. I’ll get you in the spring if we can. And that’s kinda like the same, that’s one of your money makers or you lose one of your best guys, because you can’t keep them busy.
Well, guess what? This market is still strong, very strong, and good laborers aren’t sitting at home for very long. When I was going through school for a couple different landscape companies and that happened, this was right after the 2008 recession was when I was going through school, work and doing this.
And that happened every single winter then, because guys had enough work to stay busy during the summer. There wasn’t enough cash flow because the amount of excess money in the system just wasn’t there. And it was, hey man, like you’re probably going to have to go file for unemployment or go get a seasonal job.
You guys were certified in irrigation. Tech’s been doing it for 20 years and they were good at what they did. And they were having to literally unload boxes and trucks at Kohl’s during the holiday season, because even those guys were having to take off in the winter because nobody could keep them busy. Or they find those contractors that can keep them busy cause it did exist. And then the good guy at this place, there were two main companies and one of them, it was like this weird, I don’t know, kind of a West side story type thing between the two companies. Everybody talks smack on each other, but I remember one winter, there was like 20% of our revenue left.
This company went over to this other company and it’s all like with them. Well, it was kind of, it was ridiculous. You got, yeah, it was, it was a ridiculous scenario, but it was a gated community and that was so real.
There’s really not one line. They could take us down right now, but it’d be great to get the contractors in here to see how they battle it out. You hear it all summer, man, I need help. I need good labor. And I know if they do find it, they put them through sacrifice. I need to get him through one more month and then he’ll run my jobs all summer.
Well, so why don’t we use this as a segue? Why don’t you tell everyone about where the early stages of planning of what some of our future guests are going to be on the show and what their backgrounds are? Yeah, so we sat down the other day, we went through, I think we’ve got a list of about 40 or 50 names.
From the full spectrum of our industry, we’ve got different guys that we’re reaching out to, all the way from the manufacturer side, the mill level, distribution, suppliers, all the way to the actual installers and then a few ancillary businesses such as guys who deal in lending or guys who deal in marketing or insurance billing departments.
We were talking about that one up in Boulder County. So we’re really trying to start bringing in our hope in the next few weeks, just at least every other episode, having a different perspective on our world, in the middle of these conversations, just getting somebody else’s slight counter angle to the different subjects that we’re we’re broaching with this whole conference and everything that we’re doing.
Yeah, which we’re very excited about too. So we’ll start reaching out very soon on that probably by the time that this video airs we’ll actually have the building empires website up and running for everybody to go take a look at, it’s gone through its final checking, like check through process on this coming Monday. Today’s Friday, and then we’re going to be putting it up. Pretty excited about that. We’ll get it linked up right here. And I’m stoked for everybody to see that we’re getting traction with everything that we’re doing. And we’re stoked to bring in more outside influencers into the space, to kind of build this conversation in a much greater way.
Do you guys have anything else I’d like to anybody out there listening that would like to that’s just like, no, I have dealt with that. I did lose my top form and I did lose my top line that I sold. Like who’s made it through that. Let’s talk about that. That’d be great to come in and say like, Hey, this happened to me and this is how I did it.
It’s not a predictable business tool, but it’s gotta be there. If that makes sense. You know what I mean? Like, again, you don’t want to expect it, but man, if you haven’t thought about it, you’re going to be caught. So it’d be cool to see any industry. I took a blow and I faced some bankruptcy and had some tough talks with my crew.
But look what came out of it. Like most things, you know what I mean? Like, no, I thought I was doomed and man, that was the best thing that happened to me. My company, I had to start a new one or I had to go work for someone else. Right. Or along the same lines, if you’re listening and you feel like you want to share your perspective because the thoughts that are coming out of our mouth don’t represent yours.
Right. Reach out to us. We’d love to have you. Maybe we can have you on. And we want to get as many different perspectives going here about our industry as possible. So reach out to us. Absolutely. Awesome. Once again, I’m Taylor Poole. This is Shane Hoefer and Darren West. And that was today’s RMFP The Mill.