Quote Originally Posted by Dave Kirk View Post
Hey GS,

You have asked the $64,000 question my friend and I have a very long answer that might be best done over a beer, lunch and dinner – but – I’ll give you my Cliff’s notes version for now and if you ever want to talk more just let me know.

Cash flow and profit are obviously the things we are shooting for here and one without the other is worthless in the long run. The question is how does one get both of those things to happen at the same time.

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Dave,

Thanks for the thoughtful response. I don't want to turn this into a thread about IF, or anything other than you, but could not resist picking your brain given the background. Perhaps another thread, or even a different venue, but I'd love to hear more.

In the meantime, a couple of responses to your thoughts:

First, I worked with Eli Goldratt back in the 80's, have trained in Toyota plants in Japan, and keynoted lean symposiums, so I'm pretty well versed on the principles of flow and lean production. What I bought into at IF 2.5 years ago was, and still is, a pretty good lean operation. Not quite pure single piece flow, but there is no batching, and every work order is a sold, custom frame sequenced into the production flow based on customer due date. Given the high degree of variability in product, and chronic materials delays (a whole different topic, but most of the tube and other major component suppliers in the bike biz would have died long ago if they were serving the automotive market where the on-time delivery and quality standards are much higher), maintaining strict single piece pull based on customer due date is a challenge. Our biggest bottleneck (Herbie, the fat Boy Scout from Eli's book) is paint. The high degree of variability is killer, and the dance at the intersection of art and science often stumbles, so high degrees of rework as well.

Net, IF is a pretty good operation (thanks to Lloyd, Jamie, Tyler, et.al.), and the least of our worries. The front end of the business 2.5 years ago was a disaster... blindly pursuing growth for growth's sake, making commitments to customers without being connected to the shop floor, and completely lacking any financial discipline which pushed the business to the brink. The financial stuff was easy to fix by shoveling a bunch of cash into the big hole that had been dug, and we are now extremely cash flow focused (it shocks me how easily folks forget that the customer is the only one that gives you money for anything, so shipping them a quality product, on time, is the end game, full stop).

We are now consistently profitable, cash flow positive, and in a position where from a size stand-point, we are basically selling to capacity. We are much smaller than even you would guess, and until someone proves me wrong, I aim to keep it essentially where it is, only growing when we "earn the right" by consistently producing up to our current theoretical capacity. Under this scenario, we still have head room to grow, but only by earning it, not by adding incremental assets, either human or machine, that could become asset drag if we fail to perform. This also gives us the license to say no, which is the most valuable thing I believe a brand can do for itself.

I think that the biggest problem builders that are more than a single individual fall victim to is the tyranny of growth. For a variety of reasons, they simply don't want to define boundaries for themselves, and adhere to them. Next thing you know, compromises in whatever they were once distinctive for get made, no single choice seeming to be a big deal, but they inevitably wake up one day and the sum of all of those little compromises finds them stuck in the proverbial middle, worried about how to feed the machine that they've created.

So, long winded way of coming back around to you: Aside from the reasoning that you've already provided for your own choice to be a one-man-band, and given your long tenure at Serotta, what advice do you have for folks about how to think about growth in this business, and all of the implications that stem from it. Is 40ish frames/year the magic number, and folks need to build their model and expectations around that if they choose to be solo operators and have some semblance of balance, or is there another take on it whereby builders could extend their aspirations and make it work without compromising on product, control and/or lifestyle?