Tales Of A Fourth Generation Textile Executive: Happy Independence Day!

Happy Monday Folks!  It is the summer, so every chance I get to sneak away with a lazy boy blog, I take it.  Sorry folks, but happy boring Scott is also trying to enjoy his summer and the nice long weekend.

Anyway, we should all take a moment to relish the fact that we are now an independent nation.  This is a great country that we all live in and we should all be very thankful.  With that, please make sure to eat a lot of nitrates, red meat and sweets….bearing red, white and blue of course. Also, make sure to have a couple of cocktails to celebrate the special day…if that is what you are in to. Personally, I don’t drink much, except on days that end in Y.

Finally, I wanted to say that in spite of me being lazy this week, I do have lots of blogs in the cue.  I did realize that I never wrote a post quilt market Jaftex dinner blog and I need to post that among a lot of other stuff on my mind.  Stay tuned.

Be safe and be smart.  Don’t drink and drive.  And don’t drink and sew either.

Have fun!

Summer Scott

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Tales Of A Fourth Generation Textile Executive: Camp Update & Mergers & Acquisitions Discussed

So, my son finally left for camp with a huge smile on his face despite all the tears emanating from the rest of us.  He was so brave!  And notice how I use the word finally.  It was time for him to go.  He went.  The rest is history and now I feel a lot lighter with this weight off me.  Now, let’s pray together for 46 1/2 more days of smooth sailing.  Next subject!

Over the 87 years of being in business, Jaftex has had nearly 20 companies under its umbrella and almost all of the companies were purchased from someone else. I wanted to discuss the manner in which most of these companies were acquired because I thought it would be interesting for you to learn.  But also, I think we are on the precipice of a lot of M&A activity about to occur in our industry.  Yes, this is me predicting the future without any inside scoop.  The reason being is that companies can gain more efficiencies by purchasing others. Basically, the total sales volume can increase and the overhead (expenses) on the combined company can decrease due to redundancies and other cost cutting measures.   For example, you don’t need 2 book keepers, secretaries, offices, warehouses, etc.  There is also purchasing power when you buy more stuff, so that too can result in lower costs and higher profits.

Many of the companies that we purchased had been struggling before we purchased them. In most cases, the owners were very relieved to have the life line.  Typically, the purchases were inventory based. Essentially, we and the seller evaluated the inventory and valued it based on the original costs and age of the fabric. This is a simplistic description as other factors did play in to it, but I don’t want to bore you with the minutiae.  We then buy the fabric.  In addition, we take on all the essential employees that we need to maintain the continuity of the business.  We also take on a portion (or all) of the obligations that exist including the sales.  So maybe we take on paying the insurance for the employees, but not the rent for the office since we don’t need the space anymore.  We like to think that we can be value-added to the company and turn it around by implementing methods and processes that have worked for us so well over the years.   It usually takes a year or so for us to get the company running on all cylinders.   We have been fortunate to mostly have asset purchase deals, but not all deals are the same.

Not all companies are purchased while they are in trouble.  Some are purchased at a time when the company is doing great and we wouldn’t be afraid to pay up for the right company if the opportunity arose.  In this case, the owner may want to sell out because he or she wants to retire, go in to another business, try to get out of the business at the top and/or maximize profits and the list goes on.  In this scenario, a simple inventory purchase won’t work.  This person is thinking, show me the money!  The owner will want money for his or her good will, the brand name, future booked sales, websites and so many other things that took him or her time to build and perfect.   The buyer may want a multiple of earnings.  For example if the company earned $1 million last year, they may want to be bought for $5 million plus the cost of the inventory.  That would be 5 times earnings and the buyer would be paying up.

The thing is, what multiple would you use to evaluate a textile company?   It isn’t a biotech company or tech company where the multiples could be 15% or even higher based on the huge growth potential.  Dream on if you think you are getting 15% or even 5% in the textile industry.  For this industry, I would say low single digits would be more reasonable.

It’s not like it isn’t easy to go out and start up your own fabric company. There are so few barriers to entry.  Case in point, Sue & John Linam, formerly of Fabric-Quilt, are now starting a brand new fabric business.  So why would someone pay a double-digit multiple?  If you are thinking about selling and are fantasizing about double-digit multiples, I would start thinking again and fast because it isn’t going to happen.  Once you start merger and acquisition discussions, you will learn very fast what someone is willing to pay and I would guess that the number is under 5%.

Hopefully one of these days I will have a new deal to report to you about. In the meantime, let’s see if my prediction about M&A comes to fruition.

Happy Summer Scott

Tales Of A Fourth Generation Textile Executive: Family First, Then Fabric

Happy Monday and happy belated Father’s day to all the fathers out there! I hope everyone has recovered from what should have been an amazing day with family and friends celebrating Father’s Day.  I had a lovely day with my family and some delicious Italian food too.  It was Father’s day and I am a father so why not stuff my face with pasta, pizza and so….so much more?  My belly isn’t so happy today.

Even though Father’s day was a special day for me as a father, I have other much more important things on my mind.  For one, I am so sad that my only uncle has to battle brain cancer.  On the other hand, I was so happy that he and my aunt made the trek out to my house to spend Father’s day with the family.  It truly made it one of the most special Father’s Days and I am sure it was special for him too.  The memories will certainly last forever for everyone.

The other thing that is on my mind and eating me up inside is that my oldest son (8 years old) is going to sleep away camp for the first time. Yes, sleep away camp for 49 long days.  Time is flying too fast.  I could literally remember changing his diapers.  Next it will be college.  In any case, emotions have been high in my house of late with my wife, other son and I all struggling to wrap our brains around the void that will exist in our house this summer.  Needless to say, despite being in a little bit of denial, I am an emotional wreck.  Pass the tissues please!

Thanks for listening.  Too hard this week to write a blog about anything else.  Until next week.

Sad Scott

Tales Of A Fourth Generation Textile Executive: Family First, Then Fabric

Happy Monday and happy belated Father’s day to all the fathers out there! I hope everyone has recovered from what should have been an amazing day with family and friends celebrating Father’s Day.  I had a lovely day with my family and some delicious Italian food too.  It was Father’s day and I am a father so why not stuff my face with pasta, pizza and so….so much more?  My belly isn’t so happy today.

Even though Father’s day was a special day for me as a father, I have other much more important things on my mind.  For one, I am so sad that my only uncle has to battle brain cancer.  On the other hand, I was so happy that he and my aunt made the trek out to my house to spend Father’s day with the family.  It truly made it one of the most special Father’s Days and I am sure it was special for him too.  The memories will certainly last forever for everyone.

The other thing that is on my mind and eating me up inside is that my oldest son (8 years old) is going to sleep away camp for the first time. Yes, sleep away camp for 49 long days.  Time is flying too fast.  I could literally remember changing his diapers.  Next it will be college.  In any case, emotions have been high in my house of late with my wife, other son and I all struggling to wrap our brains around the void that will exist in our house this summer.  Needless to say, despite being in a little bit of denial, I am an emotional wreck.  Pass the tissues please!

Thanks for listening.  Too hard this week to write a blog about anything else.  Until next week.

Sad Scott

Tales Of A Fourth Generation Textile Executive: The Proverbial Race To The Bottom

One thing that was very clear at market and something that I have been talking about a lot lately is that competition is fiercer than ever. Everyone, including me, is fighting for customer dollars in order to be one of the survivors. This is our livelihood and why wouldn’t we fight the fight to be king of the mountain or at least be on the mountain and not in the swamp below. With that, I have come to recognize that we are in a race to the bottom that is not healthy for our industry or any industry for that matter. Do you know what I mean by the race to the bottom?

As the overhead of the business equation goes up because that is what it probably does every year (higher rent, higher wages, inflation, insurance and the list goes on), the profit margin side of the equation goes down due to decisions being made to compete.

For example, a simple race to the bottom is that the yardage on a bolt in lots of cases is getting smaller or requests are being made for them to be smaller.  The majority of fabric re-sellers want smaller bolts so they can turn the fabric faster, make smaller investments, take less risk, have more variety and so on. Some vendors are doing this and competing in the race to the bottom.  Others are holding strong whereby they will only go as low as a 10 or 12 yard bolt.

All things being equal, the shorter bolts wouldn’t be the end of the world, but for these facts.  Shorter bolts mean less efficient cutting due to the constant changing of the board for the next piece, it means more boards, it means fewer bolts fit in a box due to the fact that more boards take more space and it takes up more real estate on warehouse shelves.   Guess what this all means folks?  Yes, there are increased costs associated with the shorter bolts.  So now, not only are you selling fewer yards, but the costs to make that smaller bolt are increased too.  So this is at a minimum a double whammy if not triple or quadruple whammy.  Lower margin-ville here we come.  Oh, stop the sarcasm Scott!  You are winning the race to the bottom.  I said stop the sarcasm Scott!  Not a race I want to be winning nor should you want it either.  Please resist because once you do this, there is no going back to how it used to be.

Another example is how buyers are always pushing for lower pricing. Of course, it is their job to get the best prices possible, so why not try? Anyway, I inevitably hear the buyer say that other vendors are lower priced than I am.  Obviously, that is sucky and no one ever wants to hear that.  The thing is that I never know if they are telling the truth or just pushing my buttons.  But they are saying it and getting in my head, so I have to deal with it anyway, otherwise someone else is going to keep eating my lunch so to speak. Assuming they are telling the truth and being that I have a pretty good handle on my fabric costs, I know where I need to draw the line.  At some point it just doesn’t work for me and my business.  I sell fabric to make a profit, not a loss.  Why would someone do that?   Because they want to be the winner of the race to the bottom.  I know, I am sorry, I have to tone down the sarcasm and be happy boring Scott.  I am smiling though.  I digress.

I am sure that you can come up with many more examples of the race to the bottom unfortunately.  But, in short, the winners of the race to the bottom will probably go out of business sometime soon because they are selling too cheaply and that is no way to be successful.  Be careful folks. Use discipline and make sure you know what margins you need to make to add to your bottom line and not detract.  Don’t say I didn’t warn you.

704 words (gotta get that down)

 

 

Tales Of A Fourth Generation Textile Executive: The Proverbial Race To The Bottom

One thing that was very clear at market and something that I have been talking about a lot lately is that competition is fiercer than ever. Everyone, including me, is fighting for customer dollars in order to be one of the survivors. This is our livelihood and why wouldn’t we fight the fight to be king of the mountain or at least be on the mountain and not in the swamp below. With that, I have come to recognize that we are in a race to the bottom that is not healthy for our industry or any industry for that matter. Do you know what I mean by the race to the bottom?

As the overhead of the business equation goes up because that is what it probably does every year (higher rent, higher wages, inflation, insurance and the list goes on), the profit margin side of the equation goes down due to decisions being made to compete.

For example, a simple race to the bottom is that the yardage on a bolt in lots of cases is getting smaller or requests are being made for them to be smaller.  The majority of fabric re-sellers want smaller bolts so they can turn the fabric faster, make smaller investments, take less risk, have more variety and so on. Some vendors are doing this and competing in the race to the bottom.  Others are holding strong whereby they will only go as low as a 10 or 12 yard bolt.

All things being equal, the shorter bolts wouldn’t be the end of the world, but for these facts.  Shorter bolts mean less efficient cutting due to the constant changing of the board for the next piece, it means more boards, it means fewer bolts fit in a box due to the fact that more boards take more space and it takes up more real estate on warehouse shelves.   Guess what this all means folks?  Yes, there are increased costs associated with the shorter bolts.  So now, not only are you selling fewer yards, but the costs to make that smaller bolt are increased too.  So this is at a minimum a double whammy if not triple or quadruple whammy.  Lower margin-ville here we come.  Oh, stop the sarcasm Scott!  You are winning the race to the bottom.  I said stop the sarcasm Scott!  Not a race I want to be winning nor should you want it either.  Please resist because once you do this, there is no going back to how it used to be.

Another example is how buyers are always pushing for lower pricing. Of course, it is their job to get the best prices possible, so why not try? Anyway, I inevitably hear the buyer say that other vendors are lower priced than I am.  Obviously, that is sucky and no one ever wants to hear that.  The thing is that I never know if they are telling the truth or just pushing my buttons.  But they are saying it and getting in my head, so I have to deal with it anyway, otherwise someone else is going to keep eating my lunch so to speak. Assuming they are telling the truth and being that I have a pretty good handle on my fabric costs, I know where I need to draw the line.  At some point it just doesn’t work for me and my business.  I sell fabric to make a profit, not a loss.  Why would someone do that?   Because they want to be the winner of the race to the bottom.  I know, I am sorry, I have to tone down the sarcasm and be happy boring Scott.  I am smiling though.  I digress.

I am sure that you can come up with many more examples of the race to the bottom unfortunately.  But, in short, the winners of the race to the bottom will probably go out of business sometime soon because they are selling too cheaply and that is no way to be successful.  Be careful folks. Use discipline and make sure you know what margins you need to make to add to your bottom line and not detract.  Don’t say I didn’t warn you.

704 words (gotta get that down)

 

 

Tales Of A Fourth Generation Textile Executive: What Is The Future Of Our Fabric Industry?

Two weeks ago, I talked about the knowledge I gained at quilt market and this week I wanted to continue discussing the buzz at the show. I am still angry that I can’t write angry blogs.  Am I allowed to still be angry about not being able to write angry blogs?  This is harder than I thought.

Ok, let me get happy boring Scott back.  One second, here he comes.  So back to quilt market.  I am amazed about how fast the world is changing. It is just astonishing and a little scary to be honest.  Well, a lot scary.  So many conversations at market were about what would bring future success when it comes to the fabric business.  Was it digital printing? Technology? Online sales?  Direct to consumer?  Stay the course?  Too bad that no one has a clue at this point, but it looks like the Amazon effect is kicking in allover the place and freaking everyone out.  Will the world ever be the same again?  Not a chance!  Sounds like a good time to retire if you ask me, but unfortunately I am a little young for that.

If I could only see where our business would be in 5 or 10 years, it would be so helpful. LOL.  Will we be in business still?  I must say that the odds are in our favor that Jaftex will be in business since we reached the 4th generation for which the odds of that are less than 1% and that’s a fact.  In any case, I sure hope so, unless we sell out for 100 billion dollars or something close to that.  You are supposed to laugh for, with or at happy boring Scott.  Will we have more companies under the Jaftex umbrella? Will we make it to the 5th generation?  Will the kids (5th Generation) want to work in fabric when it’s not sexy like working at a start up?

What’s the future of the industry?  I wish I knew.  I typically like to make suggestions on my blogs and I am almost always right…oh relax, I am kidding.  Don’t forget that this is happy Scott and all is good in the hood, all the time and everywhere….so get used to it.  I just don’t think I can make that prediction yet.  I need more time.  The future is still unclear, but as soon as it becomes clearer to me, I will be sure to let you know.  If you know or think you know, please share.  It will be insightful to hear where you think this industry will be….I was going to say in 5 or 10 years, but I think I need to be more concerned with the next 5-10 hours.

Have a great week folks!

 

Tales Of A Fourth Generation Textile Executive: What Is The Future Of Our Fabric Industry?

Two weeks ago, I talked about the knowledge I gained at quilt market and this week I wanted to continue discussing the buzz at the show. I am still angry that I can’t write angry blogs.  Am I allowed to still be angry about not being able to write angry blogs?  This is harder than I thought.

Ok, let me get happy boring Scott back.  One second, here he comes.  So back to quilt market.  I am amazed about how fast the world is changing. It is just astonishing and a little scary to be honest.  Well, a lot scary.  So many conversations at market were about what would bring future success when it comes to the fabric business.  Was it digital printing? Technology? Online sales?  Direct to consumer?  Stay the course?  Too bad that no one has a clue at this point, but it looks like the Amazon effect is kicking in allover the place and freaking everyone out.  Will the world ever be the same again?  Not a chance!  Sounds like a good time to retire if you ask me, but unfortunately I am a little young for that.

If I could only see where our business would be in 5 or 10 years, it would be so helpful. LOL.  Will we be in business still?  I must say that the odds are in our favor that Jaftex will be in business since we reached the 4th generation for which the odds of that are less than 1% and that’s a fact.  In any case, I sure hope so, unless we sell out for 100 billion dollars or something close to that.  You are supposed to laugh for, with or at happy boring Scott.  Will we have more companies under the Jaftex umbrella? Will we make it to the 5th generation?  Will the kids (5th Generation) want to work in fabric when it’s not sexy like working at a start up?

What’s the future of the industry?  I wish I knew.  I typically like to make suggestions on my blogs and I am almost always right…oh relax, I am kidding.  Don’t forget that this is happy Scott and all is good in the hood, all the time and everywhere….so get used to it.  I just don’t think I can make that prediction yet.  I need more time.  The future is still unclear, but as soon as it becomes clearer to me, I will be sure to let you know.  If you know or think you know, please share.  It will be insightful to hear where you think this industry will be….I was going to say in 5 or 10 years, but I think I need to be more concerned with the next 5-10 hours.

Have a great week folks!

 

Tales Of A Fourth Generation Textile Executive: Something To Think About & Act Upon This Memorial Day Weekend

Last weekend at the quilt market, I had a lunch date with a customer. Immediately after, I met up with my brother Greg who was eating at a pizza restaurant called Pi, but it was spelled with the math pi sign. You know that thing that means 3.14159…..

I sat with him while he chowed down on this funky looking pizza with so many odd things on it and so much cheese that my heart was hurting to watch him eat.  It looked something like this, but so much worse.

The pizza place was pretty full.  I did notice that one particular gentlemen was in army fatigues eating with his wife and two kids.  When I noticed them, the random act of kindness Scott was thinking, “wouldn’t it be nice to buy that guy and his family lunch?”  Some time passed, I ran to the restroom, my brother finished and I never did buy them lunch.  Scott Fail! I need to do better.

As we left, Greg went over to the soldier’s table and said to the gentlemen, “Thanks for your service.”  I thought to myself, that was a nice gesture. Dang it, I should have bought them lunch.

Then we headed back to the convention center chatting about business when Greg just blew my mind.  He told me that he paid for the family’s lunch.  WOW!  Not only that, but he didn’t tell the family or anything.  It was a complete and total surprise. A total random act of kindness.  It was an absolutely selfless act.  I imagine that Greg felt really good about what he did.  I was super proud of him, but truly amazed that we had the same idea in our heads.  The one difference was that he acted and I didn’t.  Silly me.

The point here being, as we approach Memorial Day weekend, think about how a small gesture on your behalf will go a long way to show appreciation to those that protect and serve our amazing country.  As my readers know, I am totally a fan of random acts of kindness.  So if it isn’t a soldier, it never hurts to surprise someone who looks like they could use a little help or cheering up.  That’s something for you to think about this Memorial Day weekend.  No one even needs to know about the good deed except you and the recipient.  That is when it feels the best.  With that, be safe and enjoy the long weekend.  Next week I will continue to discuss quilt market.

Tales Of A Fourth Generation Textile Executive: Something To Think About & Act Upon This Memorial Day Weekend

Last weekend at the quilt market, I had a lunch date with a customer. Immediately after, I met up with my brother Greg who was eating at a pizza restaurant called Pi, but it was spelled with the math pi sign. You know that thing that means 3.14159…..

I sat with him while he chowed down on this funky looking pizza with so many odd things on it and so much cheese that my heart was hurting to watch him eat.  It looked something like this, but so much worse.

The pizza place was pretty full.  I did notice that one particular gentlemen was in army fatigues eating with his wife and two kids.  When I noticed them, the random act of kindness Scott was thinking, “wouldn’t it be nice to buy that guy and his family lunch?”  Some time passed, I ran to the restroom, my brother finished and I never did buy them lunch.  Scott Fail! I need to do better.

As we left, Greg went over to the soldier’s table and said to the gentlemen, “Thanks for your service.”  I thought to myself, that was a nice gesture. Dang it, I should have bought them lunch.

Then we headed back to the convention center chatting about business when Greg just blew my mind.  He told me that he paid for the family’s lunch.  WOW!  Not only that, but he didn’t tell the family or anything.  It was a complete and total surprise. A total random act of kindness.  It was an absolutely selfless act.  I imagine that Greg felt really good about what he did.  I was super proud of him, but truly amazed that we had the same idea in our heads.  The one difference was that he acted and I didn’t.  Silly me.

The point here being, as we approach Memorial Day weekend, think about how a small gesture on your behalf will go a long way to show appreciation to those that protect and serve our amazing country.  As my readers know, I am totally a fan of random acts of kindness.  So if it isn’t a soldier, it never hurts to surprise someone who looks like they could use a little help or cheering up.  That’s something for you to think about this Memorial Day weekend.  No one even needs to know about the good deed except you and the recipient.  That is when it feels the best.  With that, be safe and enjoy the long weekend.  Next week I will continue to discuss quilt market.