In StoneTalk Episode 40, Patrick speaks with Jon Lancto of Artisan Group and MIA.
Listen to this episode to learn more about:
- Sharing best practices and buying power across companies
- The trend toward paperless
- A simple way to reconcile inventory
- Ever increasing quality
Be sure to subscribe to the podcast in iTunes… and please let us know what you think! You can leave comments for this show on the StoneTalk Facebook page or on this site.
If you have stories or insights that you’d like to share with other fabricators, please reach out to Patrick.
Transcript
Patrick: Welcome to Stonetalk, the podcast for countertop fabricators. Brought to you by Moraware, makers of JobTracker scheduling software and CounterGo estimating software for countertop fabricators. I’m your host Patrick Foley.
Today I’m speaking with John Lancto, a very experienced fabricator who’s done a ton of other things in the industry as well. Let’s give him a call.
John: John Lancto.
Patrick: Hey, John. Patrick from Moraware. How are you?
John: Good, Patrick. How are you doing?
Patrick: Awesome. Thank you so much for agreeing to do this. I’ve always enjoyed talking with you and so it’ll be nice to share some of your wisdom with other people.
John: Good. Looking forward to it.
Patrick: Cool. Well, let me jump in. First, let’s start with some background. I know you’ve been in this industry for a long time, but how did you get started? How did you get into the countertop business?
John: Well, kind of by accident. My wife and I had built a house up in North Carolina on Lake Norman and had just finished installing the kitchen countertops and had laminate. And my wife put a pot on the countertop and burned the laminate. So, I went out to the market to find if I could purchase and fabricate some Corian for the house and I did so and did it in my garage. And decided after building houses for a while that I wanted to be more of a subcontractor and not do whole house construction.
So I thought this could be a good business to get into. And went out and found a company that had just started up. I went to work with them and within a couple of weeks two of the partners of the three had left and the third was just a silent financial partner. So, my wife and I eventually bought the company within a few years and so basically started from the ground up as a one-man operation. We’re in the business for about 26 years until we sold the business last year.
Patrick: I was wondering that. So this was surface products that you were talking about, right?
John: That’s right.
Patrick: And you sold it to…was that Stoneworks?
John: That’s right.
Patrick: And so, that’s interesting. Obviously, a whole lot of detail in that 26 years. But both the beginning and the end are a particular interest. How long did you plan for that exit? How long were you thinking about selling it? How did the sale come about?
John: Well, that was not…you know, I had intentions of selling the business. But they came to me unsolicited. And the company wasn’t really on the market at that point.
Patrick: Oh, interesting.
John: So, although we were receptive it was not advertised or there was no competition for the business to sell it. So we basically saw it as a good exit opportunity and took it.
Patrick: So, it was essentially just really good timing.
John: Yeah.
Patrick: Oh, that’s great. Again, inside that 26 years, you must have gotten quite good at this aspect of building countertops and making customers happy and all that because I’ve noticed that you have been very involved with some of our industry organizations, like MIA, ISFA and things like that. When did you start getting involved with those? And are you still doing things with those organization?
John: Yes. So, I was a founding board member and the founding president of ISFA.
Patrick: Really?
John: Yeah. I served in that capacity for five years. And then I was the founding board member for the Artisan Group. And that kind of led me into the MIA which I’m now serving as president of the MIA.
Patrick: Nice.
John: So, I’ve kind of moved from one organization to the next. I’m still active with the Artisan Group as well. These organizations have always been beneficial because we’ve been very active in them. And like I tell everybody the more active you are in these organizations, the more return you get out of them. So, they’ve been good to me.
Patrick: Nice. Well, I know we’ve talked about MIA, Marble Institute of America and ISFA on this show before. But I bet a lot of our listeners haven’t heard about the Artisan Group. Can you give us an overview of what the Artisan Group is, and what their mission is?
John: Yes. It’s basically a best practice and buying group. They’re organized around the concept of not being in competition with each other. So, every time that they get together, they talk to friends, to non-competitive friends, and share what’s working and what’s not.
As I’ve become…as I’ve gotten out of the business, per se myself, and into more of the management of the group, I’m bringing to them a lot more opportunities both in exchange of best practices and opportunities to be more profitable through purchasing power, deals on listed suppliers and understanding what the metrics are around running a fabrication business.
So…go ahead.
Patrick: No, I was going to say that’s very interesting. So, you also said it’s non-competition. So, does that mean you only take one fabricator in a particular geographic market? Is it divided by geography?
John: Yes.
Patrick: Interesting.
John: Yeah, there is a little bit of overlap sometimes in the geography that these guys cover market-wise. But when that occurs the original member is given the opportunity to, more or less blackball anybody else that’s trying to become a member. So usually when that happens it’s friendly competition and usually, they’re not targeting the same segments of customer-base.
So, for instance, somebody might be a home center fabricator and they say, “We can use more exposure for the Artisan Group. I’m going to allow Joe down the road to become a member because I know he just does production brokers.” Something like that.
Patrick: Nice. And are you accepting new members? Is that something that if I…if I were a fabricator somewhere I can join Artisan Group?
John: Yeah. As long as there wasn’t another Artisan member that was in direct competition with you in that market segment.
Patrick: So, your website, if I’m not mistaken is artisan-counters.com? If someone is interested, can they go there and get more information on that?
John: Yeah.
Patrick: Great.
John: Right, yeah. And there is a listing of the members on that website as well.
Patrick: Awesome. So, when you mentioned…a second ago you mentioned metrics. So what are some of the key metrics that you would like to see your Artisan Group fabricators measuring?
John: Well, I think that the obvious ones would be the stuff around production as far as square feet per man hour. The percentage of material used as a percentage of throughput. A lot of the metrics are focused around throughput instead of dollars. For the reason that it’s a much more accurate way of measuring your productivity and takes the cost of material out of the equation.
Patrick: Got it.
John: So, the stuff around installation, you know, how many square feet can an installer install in an hour, how much can a [inaudible 00:07:33] do. What’s the…you know, how many square feet are coming off of the equipment that’s being used? So, what we try to do is group fabricators by like, market segment served. And then compare apples to apples that way. So, if you’re doing primarily [inaudible 00:07:52] work you’d want to look in your numbers compared to another guy that’s just doing the 100% of work.
Patrick: Nice.
John: So, you get a more accurate view of your operation.
Patrick: You said percentage of material used. Is that to minimize waste? So you’re…
John: Yeah. Understanding the yield on material is important.
Patrick: And how do you…I know at least at one point in time you were using JobTracker, our software. But we don’t make that, you know…there are other variables involved. So that’s not a snap your fingers and get that information kind of thing. How did you go about…where did you get the raw data needed to find out how much of your material you’re using? Did you get it off the saws? Did you enter it into JobTracker?
John: No. I think it’s all entered information. It varies company by company. We’re trying to automate that by putting some probes into the API on both Moraware and QuickBooks.
Patrick: Okay.
John: So, that we can extract that data automatically. And people don’t have to do a lot of work collecting the data as the month goes on. And we’re also…we’re getting the metrics program up to the point where it will be real time. So as you enter data, you’ll see what the range that the data should fall in, and if you’re outside of that data range you know you’ve got a problem to start with. But then, it will also look at your numbers and then against other people who have entered data as well. So it will be a real-time dashboard as to how efficiently you’re running your operation.
Patrick: So, that’s super interesting. And access to that system is a benefit of being a member of Artisan Group or is that a separate thing that you sell?
John: No. That’s just for Artisan members.
Patrick: That’s a pretty big deal because, again we don’t…we handle part of that problem but the problem is bigger than our domain, you know, the area of stuff we cover. So when you start answering bigger questions that cross multiple pieces of software then you get into the realm of best practices. as you mentioned. And that’s a real benefit of syncing up with people who kind of have agreed to attempt to do things the same way. That’s really interesting.
John: Yeah. And it’s a tough nut to crack, Patrick, because everybody does things differently. And people as I have come to realize, use Moraware differently from company to company. Either they’re fully utilizing its capabilities or they’re hardly touching it and ranges that whole scale.
So, when I go in and I see people that still have paper files for every job, I cringe first of all, but then I try to help them get over that leap to be a paperless operation at least on the file side so they’re not making the mistakes that paper files cause.
Patrick: Yeah. Exactly. And there is clearly a, as you said, a range of best practices and, for lack of a better word, let’s call it process maturity. And you know, definitely step one go from paper to electronic. However you do that using our software or some means of software, and a then from there be more consistent use your tools for scheduling, etc.
We see that with all of our customers, that you don’t, on day 30 of using our software, you’ve reached a certain point on day 300 that you’ve gone further than that. On day 3000 you’ve evolved potentially multiple times what it is you’re trying to know about your business and measure in your business. You’re constantly evolving.
John: Right, right.
Patrick: So, I noticed when I was kind of Googling background information about you, I noticed an announcement with Artisan Group, that referred to your relationship with BigFish Consulting. Is that still something you’re doing?
John: Yes, yeah. Well, I kind of had to set up a consulting business in order to kind of take on the role I’m doing for that group. But I also work with other fabricators where I’ll go in and look at their operation and how they’re using technology and try to get them to make some improvements in their operations in that regard. So, I don’t spend a lot of time promoting that business. I stay pretty busy with the Artisan Group. But it is something I also do from time to time.
Patrick: Very nice. That makes a lot of sense that I would see you doing that. And one of the, I think when I first met you was you started using an inventory tool that you had, I believe, a relative of your actuary write to help you with inventory barcoding. It was a simple iOS App. I really liked the design that the guy did for it. Do you know, after you sold the company, do you know if Stoneworks is still using that? Or is that software still being used?
John: I believe that they are. I don’t know for sure because I’m not involved in the operation. But that app is still available and it’s become significantly less expensive. I don’t know what the current price is, but it started off, I think close to $1,000. And now it’s in the hundreds of dollars.
Patrick: Nice.
John: Yes. So he’s, I guess, he’s absorbed the cost, the development cost to some extent. And is offering it on, I guess it’s on the App Store or on iTunes or whatever.
Patrick: Yeah. And actually, you can get to it from our website. I’ll put a link in the show notes as well. Its Seventh Gear is the name of the company he is selling that as. That’s great to know because the hardest part of making software of any sort is support. Is that once you write it someone has to be there to deal with stuff when it goes wrong.
John: And it’ll go wrong.
Patrick: It always goes wrong. That’s…I know you’re familiar with the theory of constraints. I’m sure you’ve worked with many of your consulting customers and talked about constraints. Ours at Moraware, is support, period. That’s our bottleneck. Our bottleneck is support. We can only grow as much as we can handle the customers we need to support which is partly why we haven’t written an app like that one you’re talking about because it’s a completely different type of support. It’s written on a different operating system.
It’s a different technology. It’s not necessarily super complicated. As I said, he did a really good job with it. But when you’re dealing with barcode reading, people don’t call and say, “The Bluetooth driver isn’t working and I need you hook this up.” No, they say, “The app doesn’t work.” And anytime you’re working with something like barcoding equipment, that’s just a whole other thing you have to deal with. So that’s why we’ve let our partners handle that sort of problem and I’m glad to see Seventh Gear is still chugging away at that. That’s really great.
John: Right. I think that Databridge is also working on a similar type if they don’t already have it in place.
Patrick: Yep. Databridge has a solution for that as well. They take a very different approach. So this is one of those cases where it’s nice to have options in the market. You know, that’s nice to see people doing that. So, you’ve had leadership positions in ISFA and MIA and you’re still active I know in MIA and Artisan Group.
In that role, what kind of trends are you seeing in the market? Do you see anything changing in the way fabricators run their business, or in the way customers are asking for things or expectations? We’re kind of in a healthy economy right now. Do you have any evidence that that’s going to change or do, you know, what have you been observing?
John: Well, a couple of things. You know, I think the quality coming off of fabricators’ equipment has gotten better. The tooling has gotten better. The CNC technology has gotten better. They understand how to maintain their tooling and how to install two of them to get longer life. So, on the CNC front that’s been kind of of a game changer.
The seaming has gotten better. You know, people used to accept silicon seam on their granite counter tops and it looked great, but now it’s polished, high strength seams are pretty much the mainstream technology that’s been used. So the customers have gotten better educated material-wise. It’s kind of of going a bunch of different directions. High-end residential stuff is going to, you know, exotic marbles. And the mainstream is going to more quartz versus natural stone. These dynamics are…you know, have been changing for a while. But I don’t see any slowdown in kind of those trends.
Patrick: Do you think that’s a good thing, particularly the second one of those? You say mainstream residential customers going to quartz, do you think that’s a good thing or would you rather see them stick with more natural stone?
John: Well, that’s all personal preference and I think I’m a true lover of natural stones. So, you know, there’s lots of great quartz products and there some great looks. But for me, it’s a personal preference thing. I just prefer natural stone.
Now application-wise, there are some great application for quartz out there that natural stone had done in the past. and I think it’s a great product and lots of applications. But it comes down to aesthetics. The other thing is that from a fabricators perspective, a lot of them are realizing that they can make more money fabricating quartz than natural stone because they’re getting better yield and less breakage. The sampling costs are less. They don’t have to, you know, worry about variations from one [inaudible 00:17:39] to the next as much with quartz as they do with natural stone. So it becomes logistically an easier product to sell.
The other thing is the perception of the production builders national, big production builders was that quartz was really expensive and it was for quite a while. But now it’s dropped significantly in price and now it’s down to the point of entry level of natural stone. So, you know, the [inaudible 00:18:06] market has been eaten alive by quartz knockoffs. So those things are, you know, dynamics that are if not holding steady, they’re accelerating.
The other thing is that I don’t think that there’s going to be a slowdown anytime soon. If you look at the number of households that are created in the United States, its somewhere between a million and a million-three each year. We’re still like producing housing at less than a million. So, since 2007 we’ve been, each year, not building as many houses as creating new households. And that’s creating some pent-up demand that there would be a lot more houses sold, new houses sold in the United States if they’re built and available to be sold to the market. So, at some point, we’ve got to start building some more houses in this country.
Patrick: There is also part of that is managing expectations. So, as we build more houses…this is anecdotal, but to me 10, certainly 20 years ago most of my circle of friends didn’t really consider granite or quartz countertops. Whereas that has steadily changed where the circle of friends that I hang out with now pretty much expect that a new house has granite or quartz countertops. The expectations keep changing that this is…and frankly I think the big box stores helped with that too, personally. As you go and browse around and look at what’s available even at the lower end of the market, people think, “Hey, I can do this.” And there is that market expectation that a new house or a decent nice house has good countertops in it.
John: Yeah. When my last year in business up in the Charlotte market, one of our biggest customers was a company that owned a bunch of apartment complexes. They flat out told us that they couldn’t be competitive with laminate countertops even in the rental market.
Patrick: Wow.
John: And these weren’t super high-end rentals. They were middle of the road kind of apartment complexes that they, as people moved out they systematically went through and replaced every laminate countertop with granite or quartz. So that’s not that unusual in the market either. So that same dynamics is taking place all across United State.
Patrick: Yeah. And it’s good for our industry. That’s great. So, I think you’ve done…Artisan as a whole has done a good job branding the Artisan Group as a premium experience. Do you work with your member companies to make sure that they don’t get sucked into a price war? I mean the things that you just said are when the market expectation goes up, you don’t want to chase that down either and say, “Oh, you can get this for the same price as something…” you know, how do you work with your partners to make sure that they still are selling a luxury or high end or not just the cheapest experience? Is that something you concern yourself with?
John: Yeah. In fact, we had a speaker come in to address that very kind of issue. Casey Brown Precision Pricing came in and talked to our group about pricing. And one of her points was that consumers might be very well educated as to the [inaudible 00:21:31] what it cost of granite. They can go to any home center and look at that. And so often our members and people in our industry are selling to that lowest common number and not looking for opportunities to make money that, you know, are around preferable products that are selling with the countertops. Like the sinks, the cutouts, the edges, the upgrades, the backsplash, all those kinds of things. So her point was, don’t give away your…you know, don’t go to the bottom. Price your stuff for what’s worth and make money on where you can. And I think lots of people left that talk thinking that they were going to, first of all, go back and start raising their prices because a 1% increase in pricing translates to a minimum of 10% increasing bottom line revenue or profit. So everybody in the industry has to start thinking in terms of the risk that they’re taking both with capital money, capital and human capital. And reflecting the prices of what they’re selling for.
Patrick: Definitely. And I remember hearing from one fabricator at an event. I can’t remember what event. Not certain of the fabricator but it might have been Scott Haynes. That there are certain markets where granite became so ubiquitous that they lost that luxury field that actually did make it harder to set the expectation that, “No, no, I’m not one of those cheap guys. I’m better than that.” And there are tradeoffs to granite being ubiquitous and being a luxury sale.
You have to work, to again, manage those expectations with your customer and say, “Well, this is why ours better and brings you better value than the other guy.” It’s just a constant mind shift to, I don’t want to say upselling your customer necessarily but making sure that you manage the expectations and meet their expectations over all the whole experience, not just, “Okay, here’s a counter that I’m going to drop in on Thursday.”
John: Right, right. I agree I see that all the time. One of the big points and everybody’s got to look out where their competitor advantage is. And one of the bigger areas that I think a lot of people miss is lead time. So when you’re competing now, lead time is so critical in order to be competitive in meeting people’s expectations that if you can overachieve, or you know, exceed the expectations in that regard, a lot of times that will get you the work. So maintaining short lead times is critical.
Patrick: And there can be a concrete dollar value attached to that. So if something is worth $5,000 in a week, it’s very possibly worth 6,000 or 7,000 or 10,000 today, or somewhere in the middle of that three days from now. When you shave off that lead time, you’ve just created value for your customer in many tangible ways.
John: Right. So that kind of goes into process management. So, if you can manage your process and know what it takes to get a job from slab to installed sales, and cut out anything that’s not adding value or taking time, you can get your lead times down to five or seven days on a consistent basis. And that alone will be drawing people in the door.
Patrick: Definitely. Well before we wrap, just a couple of quick things. One, you mentioned Artisan Group does advantageous pricing for its members. Was Kohler part of that relationship? I had the opportunity to visit with you on a Kohler tour. Are they one of your partners that you have, you know, an advantage by being part of a large group in your relationship with them?
John: Yes. We have special terms in pricing from Kohler, all the Artisan members are considered specialty Kohler dealers. And have use of the Kohler logo in their marketing and advertising which is a very powerful logo to include. So, you know, they’re one of our key partners. We also work with Craft Art wood to provide us with the Heritage wood line. And they’re our key material suppliers, AG&M and Pental Surfaces. They work with us for the Aventine line of quartz and have been long-term since the beginnings [inaudible 00:26:17] of the group.
Patrick: That’s very nice. Well, I’m not as familiar them. But since I was able to tag along with you on a trip to Kohler, Wisconsin, I would be remiss not to mention to people, if you get the opportunity to visit the Kohler in Kohler, Wisconsin, it’s an absolutely beautiful place and a fascinating factory tour if you get that opportunity.
John: Yeah, that’s a great tour.
Patrick: They’re a very interesting company. So, before we wrap, any additional thoughts you want to share with other fabricators out there?
John: Well, times are good. I hear across the board that people are making a lot of money right now. And I don’t want people to get complacent and thinking that it’s always going to be this good. It’s not. But make it while you can and by all means, consider the risks of the money you’ve got tied up in your…in your facilities, equipment, organizations, and human capital. And make sure you’re making enough money to cover that risk. So, raise your prices.
Patrick: I could not hope to wrap on a better message than raise your prices. That’s something we try to convey to people as well. It’s almost never a bad thing to raise your prices. So try to figure out how you can do that. Sell more…convince your customers that you’re bringing more value. And raise your prices accordingly.
John: Tomorrow raise your prices by 1%.
Patrick: Awesome. Well, thank you for that, John. Always wonderful talking with you.
John: Thanks, Patrick.
Patrick: We’ll put some links to Artisan Group and other things in the show notes and I look forward to talking again with you soon.
John: Thanks, Patrick. Appreciate the opportunity.
