Avoiding The Commoditization Rat Race To The Bottom

November 29, 2019 |  

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Jean-Eric Plamondon was in the scrap metal business where the stereotypical operator is a shady character buying metal by the ton with a blow torch in one hand and a wad of cash in the other.

To read a transcript of this episode, click here.

Jean-Eric Plamondon was in the scrap metal business where the stereotypical operator is a shady character buying metal by the ton with a blow torch in one hand and a wad of cash in the other.

Plamondon decided he wanted to do scrap metal differently and discovered farmers were keen to clean up their land. Plamondon offered a full-service clean up wherein a crew would tidy up a farm and dispose of all of the excess waste — including the valuable scrap metal. Plamondon got so good that he was buying farmers’ metal for as little as $3 a ton and was turning around and selling it to a smelter for more than $100 a ton.

It was a license to print money, which is why, when Jean-Eric decided to get out, he was able to sell the business to his employees. In this episode, you’ll discover: 

  • How to re-position your company to eliminate competitors
  • Where to go for advice when you feel overwhelmed
  • Why possession is 9/10ths of the law in any negotiation
  • The difference between a justice system and a legal system and what this means for your relationship with partners
  • How to systematize your business
  • What a vendor take-back is and what it means to the value of your company

Jean-Eric went from competing on price with dozens of shady operators to being one of the only providers of a “farm clean up” service. He went from having lots of competitors to a virtual monopoly on what he sold. When you’re inundated with competitors, it’s time to figure out your Monopoly Control, which we’ll do together in Module six of The Value Builder System. Get started now by getting your Value Builder Score

Our guest

Jean-Eric was a born entrepreneur, buying and selling four companies before the age of 31. He has owned and operated a variety of businesses, including a residential painting franchise, several ecommerce websites (retail and wholesale), an industry-leading scrap metal recycling business, several international export companies (commercial, retail and industrial), and more. On top of his entrepreneurial experience, Jean-Eric has also built an incredibly diverse and powerful resume working for, and consulting with, several companies including Canada’s 4th fastest growing company (2018).

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Transcript

John Warrillow:             When I say scrap metal dealer, what comes to mind? If you’re anything like me, it’s some guy with a pickup truck that’s sort of tilted to one side and stacked up with old laundry machines and lawn mowers and driving around town looking for a few pieces of metal to buy and sell for a few extra bucks. I mean, it’s not a pretty sight. My next guest, Jean-Eric Plamondon looked to reinvent the business of scrap metal but he did it in a unique way. He found that farmers were keen to clean up their farms and instead of offering to buy by the ton, he deiced to offer a farm clean up service, repositioning himself against all of the other shady competitors in the marketplace.

John Warrillow:             He got to the point where he was so good, he was buying metal for as little as $3 a ton and turning around and selling it for more than $100 dollars a ton to a local smelter. It was an incredible business while it lasted and in this episode, you’re going to hear Jena-Eric talk about the secrets of building this business. He’ll really get, delve into how he marketed the company and really positioned it to differentiate himself from the typical scrap metal dealer.

John Warrillow:             He’ll talk about in any negotiation why possession is nine tenths of the law. We’ll talk about the justice system and how that’s different than the legal system and implications of that for any sort of partnership agreements you may strike. Jean-Eric describes the systems that he put in place that enabled the business to run, largely, without him and what a vendor take back is and the implications that has on a potential sale of your company. Here to tell you the whole story, is Jean-Eric Plamondon.

John Warrillow:             Jean-Eric, welcome to Built To Sell Radio!

Jean-Eric Plamondon:    John, glad to be here.

John Warrillow:             You were in the scrap metal business! Like, when we first got on Video Link, I’m expecting this guy with like, chomping on the … like an unlit cigar, maybe a fedora. A roll of hundreds in his hand! What do you want for it? How did you get in the scrap metal business?

Jean-Eric Plamondon:    Well, I think, you know, the beard is the only thing that stuck. I actually grew the beard just for that, that look per se. But I guess I identify myself more as a serial entrepreneur. I’ve had over 10 companies now and what led me to the scrap business was … I had few coin, or a few online, E-commerce companies I was running at time at one point, and one of them was coin company. So we were manufacturing these products overseas and warehousing them and retailing or wholesaling around the world and our hottest seller at the time … some of these products, just to give you a background, they were fractional coins and bouillon is the technical term. So, bars and coins that were minted and it was essentially just trinkets for collectables. But there was also a whole segment around the world that I discovered after the fact of people who believe the currency was going to collapse one day. Some of them call themselves survivalists.

Jean-Eric Plamondon:    This market exploded. We created a whole category on eBay and our biggest selling item was copper items. So, I was trying to figure out a way … and copper was actually very expensive in China and so, from what I understand, I think they were just going through a middle-class boom, they were bringing piping and running water in and all this stuff, so copper was actually quite expensive to manufacture in China. Although the labor and process was cheap, the import costs was quite expensive.

Jean-Eric Plamondon:    So I started, and I think I attended a seminar, read a book about vertical integration. I think it was about the Rockefeller and we all know the story of how they got into the oil and then they bought the trains to transport their oil-

John Warrillow:             Sure, yeah.

Jean-Eric Plamondon:    … and then they got into steel to make the rails for their own trains, et cetera, et cetera. So they essentially started to own their own supply chain and I thought, well, where’ the cheapest place to buy copper and I got lead down the path of scrap metal. And I said okay, well, who buys scrap metal and down we went the rabbit hole for a … yeah, a scrap yard.

John Warrillow:             And so, when I think of scrap metal, I think of those guys kind of rummaging through backyards and, you know, side lots of buildings with a pickup truck and the stock, like, old dishwashers on top … like, was that the way you were going about it or how did you approach this?

Jean-Eric Plamondon:    No, not at all. I mean, I say tongue in cheek those guys were somewhat of my competitors but not at all. So, a lot of times, when people drive by a scrap yard, the average person, the average, like public members, they think that’s just a garbage fill or land fill. But there’s a ton of value in a scrap yard and some money to be made in it so I started approaching scrap yard business owners that didn’t have a really good exit plan or good exit strategy, generally they’ve made a lot of money in their lifetime, but their kids went on to professional services and didn’t want to get their hands dirty. Literally, like mom and dad.

Jean-Eric Plamondon:    So, I approach a few companies that had no succession plan. They were in their 60’s, 70’s and started to negotiate some pretty favorable vendor take back terms to buy them out.

John Warrillow:             What … so explain a vendor take back for people who don’t know what that term is?

Jean-Eric Plamondon:    So I didn’t even know what the term was, either, because I’m, you know, I later learned that was the term. So I started negotiating with the business owner to say, well, look. You don’t have a sellable enterprise here. So why … what is it worth to you and generally speaking, it’s fairly rudimentary, just here’s our assets and here’s how much money we make, so let’s multiply that a little bit and in my case, you know, it was basically the value of the assets and they were going to finance it for me at a favorable interest rate.

Jean-Eric Plamondon:    So in this case, it was like 8% annual. But the business made enough money to pay for all that and myself, and some. So it was a no-brainer for me, especially being young, and the terms were that they would stay on with six to 12 months to make sure I was trained and, you know, running this thing properly.

John Warrillow:             Great. And so, for our listeners, vendor take back is when you as the seller choose to carry a note. In essence, you basically agree to finance part of the, part or all, of the other, you know, the buyers expense in buying your company. You usually charge an interest rate, in this case it sounded like you got 8% or you paid 8%, excuse me. But the deal is, in the take back component is that if you renege on paying your, you know, the interest and payments, then the old owner, the legacy owner, gets his or her business back.

John Warrillow:             So that was the basic deal that you were proposing right? That they would carry the note-

Jean-Eric Plamondon:    That’s right. And, you know, as the buyer, you know, being young, didn’t have a lot of money to throw in, I was also giving myself some time to do the due diligence in the company. So let’s say things were really off from that they promised, it was a way to introduce due diligence in the process.

John Warrillow:             Got it. And so, how did this transform into work on farms, because ultimately, you rebranded Prairie Metal Recycling and started to kind of focus on a certain segment of the market. Tell me about that journey?

Jean-Eric Plamondon:    So that was an off-shoot, that actually wasn’t the company that I was trying to acquire. So in the process of, we had a paper deal, we signed on it, but their deal was they wanted me to actually work it for six months to show that I was serious and so where I’m from, I’m in the Canadian prairies, central Canada, Winnipeg, Manitoba. I grew up in he city, though, so I do … I know nothing about big equipment and all that stuff. So I had to get my Class 1 drivers license, which I think is a … what they call it in the States, but it’s a … like my heavy truck, 18-wheeler license and I went out and started working it for, you know, a six month trial period.

Jean-Eric Plamondon:    In that process, I stumbled into some personal divorce challenges where my marriage was not going right. So, the owners allowed me to put things on hold, come back to Winnipeg and sort some stuff out with my marriage. In that process, things didn’t work out with the marriage and the business actually moved on. They ended up finding another person to buy and so I started with another company where I was manufacturing other things in China and I needed a huge cash influx. I had our National BDC Bank, Business Development Canada, approach me, say they were going to back it. The numbers were good, but last minute didn’t. In that process, because I learned a lot about the scrap metal business out in Saskatchewan, and while I was there doing my six month working period to, you know, due diligence/prove myself, I saw there was a lot of farmers that were begging for us to take their farm scrap and at the time, no one was really accepting farm scrap, at least none of the smelters, like the end buyers of this steel, were really buying the steel in that raw form.

Jean-Eric Plamondon:    In the industry, they called it popcorn scrap which is a little technical for just saying it wasn’t dense enough for the smelters to make it worth while and that’s when a partner and I decided to look into how can we apply a profitable model to cleaning up farms all across the Canadian prairies?

John Warrillow:             Interesting. So, let me get the arc of the story here. So, you’re kind of intrigued by scrap metal through the vertical integration. You go off, you have some personal issues on the divorce front, and so you kind of walk away from the deal but you’ve got that knowledge and learning of the scrap metal and you kind of, you’ve been bitten by the bug, so to speak.

John Warrillow:             And so you come back to Winnipeg and decide to focus in on farms. What was the next step in this journey?

Jean-Eric Plamondon:    Well the big thing is number one, there are some … how would I say this? Regulations around recycling scrap metal with the environmental concerns. So, I didn’t want to buy and start a new scrap yard. A lot of the scrap yards, especially in Canada, are generally grandfathered in because the stuff they did on the land long time ago you wouldn’t be able to do today, but they’re not kind of sanctioned as scrap yards.

Jean-Eric Plamondon:    So, it gets tougher and tougher to buy a designated yard. So I thought to myself, well, how do I build a scrap yard without the scrap yard component? And first thing we did, is we approached one of the smelters in the prairies who, historically, had never bought … no one would buy farm scrap. And after a little convincing and quite a few trips down, I ended up speaking with the VP of this large steel smelting company and they said to me fine, because I just wouldn’t leave them alone. They said look, if you can get us 2000 tons, or, sorry, 1000 tons in the first 30 days, which is a huge number, we’ll consider doing a deal with you.

Jean-Eric Plamondon:    And so off we went. We took a lot of the technology that we’d see in a big scrap yard and found smaller components and created some interesting ways of getting on the farm site with road restrictions, et cetera, et cetera. And we ended up hitting that target and some, so we hit 2000 tons in the first 30-days and that what triggered-

John Warrillow:             Instead of … and so this allowed you to get the contract with the smelter who would basically take the scrap metal that you were dropping off and basically turn it into recycled metal. Is that … is that basically it?

Jean-Eric Plamondon:    Exactly. Exactly and-

John Warrillow:             What was the business model Jean-Eric? Like, in terms of like, how did you make money in this process?

Jean-Eric Plamondon:    The business is actually quite … it’s flipped. You know, our customers, the way we would view customers or actually people we were buying scrap off of and whereas, as a traditional business, your customers are who you’re selling to, so, our biggest challenge … well, after we got someone that would buy our scrap metal … you know, and to fast forward that, they eventually opened up a whole section of their yard. They ended up hiring eight employees just to handle our, the amount of scrap we were bringing in, because they had to do some processing but because we brought enough volume, it made sense for them.

Jean-Eric Plamondon:    So once we had that figured out, we also negotiated some really good payment terms which we can touch on later, which helped with cash flow and growing. We had to really focus on, okay, how do we get this scrap now? So our buyers, or our customers which we were buying off of, we had to really look at how are we positioning ourselves? So the people that you referred to at the beginning of the call, you mentioned, you know, the guys with the pickup trucks and rickety … just … overall shady individuals-

John Warrillow:             Yup.

Jean-Eric Plamondon:    Those were our competitors so there were people that would go out to farms and they’d show up with a big torch or they’d show up with a crusher and, you know, sometimes they were paying a fairly good price for this stuff, you know, the widget in scrap is, the unit of measure is tons so people were paying between $80 and $120 a ton in the middle of nowhere Canada to buy it off the farmers.

Jean-Eric Plamondon:    So when we approached farmers, first question invariably was how much you paying a ton? And so our biggest difference is that we really started to focus on how do we position ourselves differently than a scrap metal company and that’s when we started to look at ourselves as a clean-up company, so we were a farm clean-up company. We didn’t even talk about dollars per ton and we started to talk about what were the pain points of our customer.

Jean-Eric Plamondon:    And so the pain points of our customers were pretty obvious after meeting with a few of them. But we can get into that if you want.

John Warrillow:             Yeah, I’d love to know what they were. So … because on the end, it’s like, it’s just the crap on my farm. It’s a commodity. I’d, you know, I think if I owned a farm, I’d be in the same boat. I’d be like what’s your price? $80 or $100 a ton? I would feel it’s a commodity. So how did you change that in the mind of the farmer into I want to buy farm clean-up services?

Jean-Eric Plamondon:    Well, so to our generations, yeah, absolutely, we want that stuff out of here. But to the older generations, there was a bit of a cultural thing. A lot of the farmers that were on these farms were the same farmers that, it’s their great-grandfathers that started and these are the people that went through The Depression. They went through, you know, a lot of people that came over to Canada in immigration, in the times when their home country was going through a lot of depression and poverty. So there’s this culture of save everything. Throw nothing out.

Jean-Eric Plamondon:    So that was one of the objections that we had to kind of work through. They always thought this was some good iron and one day we can, maybe, use it again. So that was one objection we had to work through because that rusting heap of metal was not usable. So how do you say that in a non-offensive way?

Jean-Eric Plamondon:    And, the second aspect is these people were … they were skeptical that we could get it done in a way that was respectful to their environment, like to their yard, and actually get the job done. So a lot of people would overpromise and under deliver and we would call that like the cherry picking factor. So we would have the, those guys in the pickup trucks show up, start using torches which is a big no-no because a torch is fire and that could light their millions of dollars of crops on fire which is not covered by their insurance companies.

Jean-Eric Plamondon:    So, little fun fact. When we learned that, it was like okay great, no torches for sure. And these guys would come in and take the valuable parts of the, off the farm equipment. So they’d take the big copper radiators of the front of the tractors or take the engine or take the catalytic converters, which has platinum in it, and then just kind of leave this stripped vehicle there. Just the shell-

John Warrillow:             So you get the tires on your … you still go all the crap and none of the metal! Interesting.

Jean-Eric Plamondon:    Exactly! So now you have an even bigger mess and, you know, when farmers couldn’t approach it with their farm equipment because it would blow their tires and so it was really a nightmare for them. So that was where we started to say okay, well, we brought in some expensive, custom equipment from Italy, like these huge 52-inch magnet disks that could pick up, like, six tesla of metal which is like thousands of pounds at time. You know, farmers loved hearing about that. And so we started to show we are going to promise you a 95% clean up. 95, because, let’s be real. 100%, we can’t clean up all those cans that your grandpa threw behind the shed for the last 50 years.

Jean-Eric Plamondon:    So, you know, we would do the 95 and we would explain what that looks like and what that means. And, the last thing of course, is we are so confident that we’re going to get this done, we will pay you today. And so-

John Warrillow:             Wow! So your putting money in their hands the day you, sort of, due the contract?

Jean-Eric Plamondon:    That’s right.

John Warrillow:             How did you figure it out? How did you figure out what you’re wiling to pay for all this metal?

Jean-Eric Plamondon:    So, when I came in the industry … and I’ve done a lot of sales in my previous companies so I’ve learned how to have, a little bit of like the script, the story, overcome some objections. So when I came in and I saw people were paying between 80 and 120, in that six months, I was buying some scrap in that due diligence phase of that one scrap yard, and I was able to start getting it down to about $60 a ton. And that was, like, revolutionary!

Jean-Eric Plamondon:    Like, how are you doing this and I think that was just basic framing and sales script and negotiating. By the end of it, we were buying between $3 and $5 a ton.

John Warrillow:             Wow!

Jean-Eric Plamondon:    So how did we get there? It was a bit of a process and so that process was, well, first of all, we never talked about dollars per ton, ever. And number two, we started to … we had some positioning so, like, in our scripting for our sales people we would talk about, you know, what are the factors that are going to drive your price? And so, we do say things like well, it depends on how much you have per scrap. How spread out is this scrap metal and how hard it is to get to?

Jean-Eric Plamondon:    You know, and especially in Saskatchewan, they have these alkaline soil patches where, if you have anything that goes in there, you may risk completely losing your piece of equipment. It’s just like Canada’s equivalent to quicksand, which I’ve never even heard of until this business. But, so you know, we had to start working with the farmer and so it incentivized the farmer to give us more because they were always undecided about that old steam tractor that had three trees growing through the engine because, you know, maybe we’ll restore it one day, right?

Jean-Eric Plamondon:    So when we incentivized them, like, if you give us more, we’ll give you more money and if you can help us by dragging some of your cars out and bringing it in piles, again, we’ll give you more money. So we worked with them on that component and … I think one of my secret weapons is while I was, we started bringing … when I brought a sales team in, I hired girls that grew up on farms so they knew how to interact with farmers because they were either from a family of farmers and they understood what farm equipment was. And we would do the training with those girls to, you know, I would create a very simplified system of farm equipment, categorized by colors because sales people love colors, and they would … they didn’t even know what they were calculating. They were just doing check boxes in this form so tractor, that was one check box in the red form. A bailer? Okay, that was a check box in the yellow boxes and then they would just … and then they had very clear instructions. All the greens, add them up, times it by this number. All the yellows, yadda yadda and they got a number and whole number, you times it by it this and that’s your price.

Jean-Eric Plamondon:    But the girls has no clue so when the farmer was grilling them, or so I thought when the farmer would grill them, the girls have no idea. After about a few weeks, after they were trained in the field, I called a meeting. Today, girls, we’re going to be doing injection handling. And they go what’s that? So, you know, when you give them the price and the farmer wants to haggle with you. They said Jean, we don’t get objections. Great! Okay, keep going-

John Warrillow:             Tutorial over!

Jean-Eric Plamondon:    So I think some of these farmers are excited to just deal with them.

John Warrillow:             I was going to say, I have to ask … you say your sales people are all women. Was that intentional on your end to hire women? It sounds like you’d wanted people who’d worked on a farm, but were you specific about their gender?

Jean-Eric Plamondon:    No. No. So, actually, that happened by accident. So we did have guys and girls. I ended up having to do a lot of it myself at the beginning because it was just a weird and hard job to fulfill. You know, we serviced a 300-mile radius of farmers across the prairie so it was a really weird job to fulfill and what happened is, one of the guys we hired … a could of the guys we hired, they asked well, can our girlfriends come along? And it turns out they were all from the farm.

Jean-Eric Plamondon:    And we just kind of said well, hey, I can probably fit you in here and just do some basic training with you and see how it works out and that was the … we stumble in it by accident.

John Warrillow:             Got it. So when you say you had to do the job yourself, you’re talking about in the beginning, you did the selling yourself? You approached the farmers directly and then you trained these, as it turned out, women to do the selling for you? So, walk me through the economics. So, like, you end up buying the metal for as little as $3 a ton, but sort of in that three to five range. What are you selling it to the smelter for?

Jean-Eric Plamondon:    So, yeah, I guess I can break that down now. We were selling it between $220 to $300 a ton and, of course, we had costs to get it there and our costs were not cheap. We were paying, we were paying very skilled people that, you know, knew how to run this heavy equipment that came from like Northern Ontario where there’s a heavy industry of logging and, you know, people that are the true MacGyvers. If something breaks down in the middle of nowhere, they know how to fix it.

Jean-Eric Plamondon:    So we had some incredibly talented people that were also not cheap to employ and our biggest cost was also trucking. So the fuel, we were burning at one point $22000 of diesel a week just running our outfit. So that, you know, and so we can talk a little bit about that, too. That was some of the technology we implemented to help cut down those costs which brought us to that margin.

John Warrillow:             I’d love to get into that. Just to … before we leave the economics, so you would pay the farmer upfront and just give me … I mean, is a farmer getting a check for like $100, $500, $10,000? Just give me a frame of reference. Is it a few hundred dollars usually or a few thousand? Like what would the-

Jean-Eric Plamondon:    Yeah, so, the average farmer that … I mean, we had a great marketing plan. Like, we were getting dozens and dozens and dozens of leads a day so we were also very good at screening and qualifying. So the average farms that we would go to had at least 30 tons on it. So the average farmer was getting thousands of dollars, sometimes tens of thousands.

John Warrillow:             Okay.

Jean-Eric Plamondon:    If, you know, from a traditional crushing, bailing company, that would go there but also make a disaster of a mess on their farm. So, yes they got a nice check, but they had this mess that … and potentially … farmland that they could probably not utilize for farming either. Whereas with us, we basically said enough for you to take your wife out for a dinner and a date. You know, so it was like in the hundreds, generally.

John Warrillow:             Okay. So … but there were still expenses along the way. How did you manage the cash because it sounds like a very cash intensive business because you’re laying out money to the farmer. You’re laying out money for the sales people, the truckers, to get it to the smelter and then you’re getting paid only after you kind of get it to the smelter. So walk me through how you made all the money stuff work, the cash flow in particular work?

Jean-Eric Plamondon:    So when we negotiated with the smelter, you know, after that 30-day trial when we doubled their target … which, by the way, we later found out that the closest company was like 250 to 500 tons. So we came in there and smashed their target at 2000. The first thing they said to me when they called me is like who the hell are you and where are you getting this stuff from? And so I knew I was in a position where I could probably negotiate some cool terms and we negotiated that we could get paid the day we delivered the stuff and so that was pretty valuable for us because, earlier I mentioned that we were a scrap yard without a scrap yard. Our inventory was essentially what was on the truck. And our trucks would go straight from the farm to the smelter.

John Warrillow:             So not sitting on that for a long time?

Jean-Eric Plamondon:    Exactly. And … so no inventory. We’re very lean and, especially when you’re starting up and scaling up, sometimes I was going to that scrap yard twice a day to make things work. Like just to go collect my check!

John Warrillow:             And you guys, I mean, talking about growth, I mean, you guys grew exponentially. Like, just give us the metrics. So you start at zero revenue. What did you get to and how quickly did you get there?

Jean-Eric Plamondon:    So to give a frame of reference, where we were operating in Canada, it’s like a sheet of ice half the year, essentially and where we were operating, we had to get into farm yards were ditches are the traditional deep ditches. So, once that fills up with snow, you don’t know where the farm approach is to get into the field and when you’re carrying a 60-foot long trailer, because we have a special kind of trailer so we can carry in Canada, you can flip trucks pretty quickly.

Jean-Eric Plamondon:    So, the reason I say that is immediately our season’s cut in half. We only have at best six months to operate in the year and then, number two, we’re going into farm yards. This is just dirt. There’s no gravel. There’s no concrete and we’re bringing big, heavy trucks in so as soon as it’s raining, or, you know, what we would later learn to call subsoil moisture, that would also effect us.

Jean-Eric Plamondon:    So now, a 12-month year has been reduced to three months at best. So we had to really figure out, okay, how do we maximize when the sun is shining … make hay when the suns shining?

John Warrillow:             Yeah.

Jean-Eric Plamondon:    That was very true for us.

John Warrillow:             So revenue, where did you get to?

Jean-Eric Plamondon:    Thank you. So, in the … our season starts, started in May and by … we had a pretty good fall. By November, we hit our $5 million mark.

John Warrillow:             It … and how many years did it take you to get to 5 million?

Jean-Eric Plamondon:    Six months? Seven months?

John Warrillow:             This was in the first year, you go all the way to $5 million?! From zero to $5 million?!

Jean-Eric Plamondon:    Yes.

John Warrillow:             Wow! In one year!

Jean-Eric Plamondon:    Yes.

John Warrillow:             That has to be the fastest I’ve ever heard anybody get to $5 million in revenue! That’s unbelievable!

Jean-Eric Plamondon:    Yeah, it was fun. But it was also really stressful so, yeah.

John Warrillow:             It … well, let’s talk about that because … look. With the … it sounds like a lot of this, at least in the early days, was really dependent on you. I mean, you’re driving around to these farmers. Like, what did you do to get it to be less dependent on you, personally? Or did you?

Jean-Eric Plamondon:    Yeah, and I made some pretty big mistakes. Like we, we had some big wins, but I don’t want to shy away from the fact that I also made some really big mistakes as well on the way-

John Warrillow:             Such as?

Jean-Eric Plamondon:    … and so … bringing in the wrong partners. You know, we-

John Warrillow:             What happened there?

Jean-Eric Plamondon:    … yeah. So, I’ll take a step back. So I started this company with a partner and the type of business partner that I … the type of entrepreneur that he is, is he’s a very quick start-up and he liked working the operations. Being on the field, work the machines, so that allowed me to focus on the marketing, the PR, the sales and we worked really, really well together.

Jean-Eric Plamondon:    What comes with the type of entrepreneur who loves start-up is he moved on, he wanted to move on within the year or so. And so he got out, he ended up taking the import/export company that I briefly touched on at the beginning and then I took the scrap company and we moved on that way.

John Warrillow:             So you agreed to part ways without cash exchanging hands? Like you take this, I’ll take this and on we go?

Jean-Eric Plamondon:    Pretty much. Yeah. You know-

John Warrillow:             What did you learn from the experience?

Jean-Eric Plamondon:    … and they were … that’s actually right when I got introduced to EO, Entrepreneurs Organization and that was very valuable because one of the big things is that, I didn’t … I never really knew where to go for advice. I didn’t come from a family of entrepreneurs and traditionally everyone in my family is a government worked or union worker so, you know, what I was doing was already very different and I didn’t know where to go for advice.

Jean-Eric Plamondon:    And so, I’ve had … I had a few lawyers kill the deal and strain our relationship quite a bit because I just, I didn’t understand that I was the one actually driving the ship. Instead, I let them, kind of, drive the ship. Same with a couple of accountants and so EO really helped me hear from a couple other business owners going no, you’re the one in charge. You call the shots and this is how you structure the deal and they’ll advise you on, you know, the worst case scenarios but at the end of the day, you got to call. Call the shots.

Jean-Eric Plamondon:    So that was a big one that kind of strained our relationship but in the end, we did recover and, you know, we still catch up once in a while which is good.

John Warrillow:             Yeah, for sure.

Jean-Eric Plamondon:    The divorce, the divorce hit pretty badly after that and that’s when I brought a partner in. You know, we had excellent financials. We had no debt. You know, because basically we were getting paid instantly so our receivables were zero and that partner, I … I didn’t do the proper work in creating systems of checks and balances and, you know, even though I knew him through friends and I met him through a church that I used to be involved with, and so I thought it was a good deal to do and showed him all my intellectual property. I basically just opened the kimono and said come on in, let’s do business.

John Warrillow:             What was driving you to want a partner in the first place?

Jean-Eric Plamondon:    So my divorce was getting pretty bad and my, I had … I was being torn into a different province in Canada and especially at the time, where we were, there was no direct flights so it was a six to eight hour drive to go back home every week, deal with the divorce and at risk of losing custody of my son, and so I needed somebody to have boots on the ground, per se. Or at least, so I thought.

Jean-Eric Plamondon:    So I, I equipped this person to be my right hand person and I gave them absolutely everything. And that was probably one of my biggest mistakes because by the end of the season, that season, he thought that he was the magic of the company. There was some good systems in place, in terms of the staff level, some of the managerial level, but he thought he was the magic and he ended up taking half my staff, all my IP, my customer list and started a carbon copy right next door to us. So that was a fun wake up.

John Warrillow:             What did you do?

Jean-Eric Plamondon:    I consulted a bunch of lawyers, but again, at the end of the day, I learned that we have some fairly strong laws in Canada where, you know, you can … non-competes don’t really apply and it’s only as good as the person who’s willing to enforce it so that was going to cost me a lot of money and a lot of distraction. Also, we had these laws in Canada where we have a right to earn a living and that was kind of the biggest … probably the biggest weakness in the whole what was driving me into wanting to pursue a legal action.

Jean-Eric Plamondon:    So, what I learned from there is, you know, your intellectual property is valuable and possession is nine tenths of the law so hang onto that stuff as much as you can, even if, you know, it’s a business partner because the legal system is, it’s not a justice system, it’s a legal system and it’s only as good you’re able to defend yourself in a court of law.

John Warrillow:             I love that. I don’t love your story and the effect, I’m sure, it had on you but I do love the lesson of possession being nine tenths of the law and the fact that we have a legal system, not a justice system. Those are two very, very tough lessons, it sounds like, to learn.

Jean-Eric Plamondon:    Yeah.

John Warrillow:             So how did you pick up the pieces from this sort of divorce with this partner? What happened next? Were you able to resuscitate the business after he left?

Jean-Eric Plamondon:    We were, actually. It was interesting because there was a huge division. The people who didn’t want to go believed in the vision and in the culture of what I’d created and they saw, they saw the systems, they saw what I was doing, more than … and how I would describe my ex-partner, he’s very sales person, very charismatic, very outgoing and so they would call it we don’t care about the fluff, we see the value here.

Jean-Eric Plamondon:    So, that was pretty cool because in the time of polarization, our culture got really strong and that’s when, you know, I was probably in the deepest trenches of my divorce and it was one of those things where it was do or die. And my staff, we, you know, I doubled down with some of the technology where I was creating orientation training platforms virtually so that I could do it from a different province in the country. We would do virtual calls or, you know, just call ins on a regular cadence so that we could stay in touch and I was able to start … I was essentially forced to create a company that could run and grow without me, I don’t need and I think where is that saying? Mother … the motherhood of necess … of innovation is necessity?

John Warrillow:             Yeah. Necessity is the mother of invention, I think is … yeah. Got it. Okay, so, give us a sense of the kinds of systems you put in place? Maybe give me an example of one where it wouldn’t be necessarily typical in a lot of small business, because a lot of small business listening to this, business owners will say yeah, yeah, I’ve heard that I need standard operating procedures or SOP’s but it sounds like you went to another level. Give me an example of one that, that-

Jean-Eric Plamondon:    Yeah, so let me share this. You know, in my EO forum, I had … a forum is like our, essentially, a mastermind, and I had a guy who was running a fairly large trucking company locally and in the province that I was stuck in and one of the pain points in that industry for trucking is paper, or, truck drivers are notorious for not handing in their paperwork. So, like driver logs and stuff like that, and I started recognizing that when I’m not running a company hands-on, real time data is crucial especially when these truck drivers are sitting on my biggest cost center. So, you know, fuel and the trucks themselves.

Jean-Eric Plamondon:    So I needed real time data and so at the time, GPS technology wasn’t really strong enough because where we worked we didnt have strong cell phone service … we were in the middle of nowhere. So I had to, so what I did was I equipped my drivers and everyone in the company with iPhones and started to tie a gamification system to this. So I was looking at creating … I created a bonus structure for every individual role and the truck drivers, the bonus for them was you get an X amount of dollars for every ton of steel you deliver. And it was a big bonus. Sometimes it was doubling their daily pay under the following conditions.

Jean-Eric Plamondon:    And then I started to think about what would the perfect employee be? And I don’t know if the perfect employee exists, but I thought about, you know, piecing some … who are all my best employees I’ve ever had and I started to piece together what would that be? And so these were the conditions. So the conditions were: you drive safely, of course. Safety’s number one. But what does that mean? It means your good on the accelerator, you’re not hard on the brakes, you’re not hard on the equipment. So we would measure that by fuel mileage per kilometer and you would hand in your paperwork at the end of every day which is quite difficult when you’re head office is 600 miles away from where these guys are driving.

Jean-Eric Plamondon:    But because they had iPhones and they would end up in a city center where they would have wifi and stuff like that, they could scan and send it in ever day. Now that was tied to my other people in house who were trained that if they got that data into our systems so I could read our dashboard, then they would get, they were in the line for their bonuses. So, which was pretty cool because the system of bonuses was also a self-policing check and balancer per se where the girl in the office knew that if the trucker didn’t send her the stuff, she wasn’t going to get her bonus, or the guy in the office doesn’t … I had both guys and girls, then it was uh-oh! You know, I better call this trucker and so then, there was this … the company was now the culture of not necessarily policing, but encouraging each other that if we need this-

John Warrillow:             Self healing, maybe.

Jean-Eric Plamondon:    Right. So that was one example where I now had real time data of where are we at and I could start to actually project where our costs were going to be so that was a big one for us.

John Warrillow:             How many employees did you get to in this company?

Jean-Eric Plamondon:    18 was out maximum because, you know, I think with two business owners, it was just easier. One at front of house, one back of house, to be roughly speaking and then by the time I sold, I was just starting to scale up again. I think I was at 13, 14. We were just rolling out our fourth crew the day that the … we had commodity crash per se in our market, so.

John Warrillow:             I want to get, I want to get to that in a moment, but, you know, you’ve alluded to the lead generation system you put in place and before this interview, I had a chance to watch the explainer video that you created. A little animated, you know, two minute video that described farm clean-up, the category and I’ll put that in the show notes for people listening because I think it’s a tremendous example of taking ownership of this farm clean-up category and differentiating yourself from just any other scrap metal provider. What was the effect of that explainer video on your business?

Jean-Eric Plamondon:    It was tremendous. I mean, I … I can’t remember if it was a seminar. I attended a lot of seminars and I did a lot of training coaching over the years to kind of keep up with these companies and I think it was Joseph Campbell and he started talking about the power of stories and how, I mean, you would know this through Built To Sell, you know, it reads like a fable. Stories are so great for getting passed the conscious and really seeping into the subconscious and I thought, you know, what a better way to do that through an explainer video?

Jean-Eric Plamondon:    And, you know, scrap metal companies are generally big, tough and kind of gruff as you were explaining at the beginning of the call, so I had this cute little animated video that we created and in the process of creating that we … I started to outline what are all the top 10 pain points and objections that we come across? And if you watch the story, there’s … you’;ll probably count 10 to 12 objections that I slowly break down throughout that two minute video.

Jean-Eric Plamondon:    We started to track our calls and just to your point of what would the … the impact, the farmers that would call who watched the video versus the farmers who didn’t watch the video, the ones who hadn’t … it was about a 15-minute phone conversation on the initial point of contact-

John Warrillow:             Five … five zero?

Jean-Eric Plamondon:    One five.

John Warrillow:             One five. 15-minutes?

Jean-Eric Plamondon:    15-minutes.

John Warrillow:             Okay.

Jean-Eric Plamondon:    Because it was who are you, are you Canadian, you know, how much are you paying? What do you mean you don’t know how much you’re paying? It was a very, like, adversarial type of grilling conversation. And the ones who watched the video were five minutes in length because that’s just about how much time it took to take down all their information and they were just like … and their biggest question was when can you get here?

John Warrillow:             Wow! That’s the power of a video. What did the video end up costing you?

Jean-Eric Plamondon:    Well I spent a week on the beach in Mexico spending all of the time putting this together and I used a freelancing platform called … it’s now called Upwork. It cost me like $1000. But that’s because I was very do-it-yourselfer, you know, I had coaches and I was … a marketing company could have probably done it for $5000 to $10000 but-

John Warrillow:             Right, but it made a huge impact on your business and again, I loved the repositioning. Before I let you go, let’s just talk about the actual sale itself. What triggered your desire because you’d gone through this nasty divorce both personally, but also with a business partner. That sounds difficult on every level. Was that a contributing factor to wanting to sell or was there something else?

Jean-Eric Plamondon:    Yeah, I mean, this company was so much fun to run and it … I truly felt it was my baby. Making that decision to let it go was very hard, but it ultimately came down to the divorce was settled but there was some pretty difficult custody challenges that I was still going through and it was essentially a decision between losing the custody of my son or moving to a different province and running this business.

John Warrillow:             So you couldn’t live in Saskatchewan and work … keep custody of your son? You had to move to Manitoba?

Jean-Eric Plamondon:    Yes, seemingly at the time. Just my estranged ex-wife was just … it wasn’t working and so that was the … that was the appearance-

John Warrillow:             Was there an option to run it remotely and be in Winnipeg and have the business operate without you in Saskatchewan?

Jean-Eric Plamondon:    There was. The challenge was that … I alluded to that commodity crash in Canada and so the, the commodity pricing of our steel went down. The margins were tight for a couple years and in order to really maximize things, it would have required probably a lot more tightening of certain aspects. You know, including … what I would do at the end of the season, I would transport all of my equipment back to my province so we could park it where I was so I could maintain, do they maintenance on site with my staff.

Jean-Eric Plamondon:    Those types of things were just driving so many extra costs and it was lot of unnecessary stress so at the time, it was a very hard decision but the fact that I had built the systems and I had staff that were running most of the operations and I kind of had like a blueprint to printing cash gave me that option to be able to approach my employees with all this. They had a lot of enthusiastic interest in buying it.

John Warrillow:             Yeah, so let’s talk about that. So did you think about selling it externally or what made you decide to sell to your employees?

Jean-Eric Plamondon:    I think speed was the big factor because they saw everything. They didn’t have to run a lot of due diligence. They understood it. And … because our industry was quite depressed at that time … so to, quick to explain that. The person I was selling my scrap metal to, they were melting it down and making oil and gas equipment and supply and because that market was effected as well in 2015-16, you know, everyone kind of got they trickle down effect of that mini-depression, per se.

Jean-Eric Plamondon:    So, that was a … that was the … sorry. I lost my train of thought.

John Warrillow:             Yeah, no-

Jean-Eric Plamondon:    The-

John Warrillow:             I was wondering about why you decided … did you think about marketing the business externally, like hiring an advisor-

Jean-Eric Plamondon:    Oh, yes, thank you-

John Warrillow:             … or whatever. But it sounds like-

Jean-Eric Plamondon:    Sorry about that.

John Warrillow:             … you went pretty quickly. No, that’s okay. You went pretty quickly to sell to my employees and I’d just be curious to know-

Jean-Eric Plamondon:    There was a reason for that.

John Warrillow:             Yeah.

Jean-Eric Plamondon:    Yeah. Yeah, sorry man. For the reason for that is because the business wasn’t operating like it had been in the past. So, a few of the people that were interested in it, they were more panicking about well, why did the margins go down and it’s … the explanation of, well, it’s because the market went down. Just the wait another year or two, it will go back up. To an outsider, they just couldn’t understand that. They saw a shrinking business that was nose diving.

Jean-Eric Plamondon:    Whereas the employees, they had been around, they understood that. So that was kind of the advantage there is the company at the time, and I took a year off. We waited because the market got so bad, so we just waited and it was producing no revenue. But, to sell it to those employees, they paid more than definitely just the asset value because they saw that there was a blueprint here once the market came back, which it did.

John Warrillow:             How did you value the company?

Jean-Eric Plamondon:    That was just a negotiation between us and them. Basically came down to me helping them … I built them a business plan and approached financing with them to help them figure out what they could get financing for and I wasn’t interested in an earn-out or a long-term so we maximized what we could and I got paid out for it.

John Warrillow:             How did you get them financing? Like, who was willing to finance that?

Jean-Eric Plamondon:    Good question. We approached … I guess, what were they called, be called? Like B lenders. So they were very, they were very asset based and they were willing to give the assets a very high value to make up for the good will portion that my employees were paying.

John Warrillow:             Okay, and the assets in this case are what? What are the assets that you have?

Jean-Eric Plamondon:    So what we would buy these excavators, and outfit them with custom grapples, magnets, trailers. We would make custom bins that would go on the trailers. Lots of service vehicles. And then … those are like the hard assets, per se. And then everything else was just like the contracts and how we would market and how we would reach the farmers. That was the soft assets, per se.

John Warrillow:             And how did you come up with a number in your mind? I know you say it was a negotiation, but did you have sort of a magic number that you were like you know what? If I can get this, I’m good? Or how did you figure that out?

Jean-Eric Plamondon:    I’m trying to put myself back into that situation. I think I was mostly just trying to simplify to get … like I had mentioned, we weren’t operating for that one year. So I had a … I still had a whole bunch of costs. I was … we were still maintaining and repairing so, costs and no revenue … so that was a pain point for me. And I had no … we knew what we had made for profits over the years, so it was just a bit of a negotiation between here’s what we’ve made, here’s what our average is, here’s what’s costing me. I’m willing to let it go today for this much and yeah.

John Warrillow:             But did you have a multiple in mind? Like, was it a multiple of your assets of a multiple of profits in the good years? Like how did you figure that out?

Jean-Eric Plamondon:    Good question. I didn’t. It was essentially just here’s what we made for profits. Considering the company wasn’t running, it was over one and it was under two so it was like somewhere in that range. Yeah.

John Warrillow:             Got it. That’s helpful, for sure. And then, with regards to getting financing, so are you saying that you had all this equipment, the Italian magnet, I have this visual of this huge magnet you bring out onto some truck. But all these assets, the … are you saying that the B Lender was willing to finance them at a rate higher than their market value in an auction site, for example? Like you, if-

Jean-Eric Plamondon:    Definitely higher than an auction site. I mean, they saw value in the assets that we, that we placed on them as a whole and we just said look, everything as a whole. Here it is as a package and they came out with their own valuations and it worked. So we were … they were happy and I was happy. But I had no earn-out … yeah.

John Warrillow:             Okay. And so, the B Lender’s recourse if the employees as a collective, were to have reneged on that interest payment to the B Lender, the B Lender would have gotten those assets. They weren’t … whether your employees personally guaranteeing the loan? Were they on the hook personally?

Jean-Eric Plamondon:    That’s a good question. I … I didn’t see the final paperwork. The lender wouldn’t let me see it in the end. They said Privacy Act. Who knows? Maybe … who knows? But I … I think what happened, at least for some of it, I think it was the lender bought the assets and leased to owned it. I think that’s what happened on a couple of them. But, from what I understand, the market came back and employees paid it out very quickly, like way earlier and I think they even paid a little bit of a early pay out penalty because they made the money and some. So, I’m not sure exactly how it all turned out. I should ask them next time I see them.

John Warrillow:             Yeah! How did you handle it, again, if I’m asking you questions you can’t answer, don’t want to answer, just tell me to go to hell. But, with your former wife, presumably, she had some claim over the value of this business. How did you guys deal with that? Did she have a say on, in how much you could sell it for or who you could sell it to? Did she have any sort of claim over this?

Jean-Eric Plamondon:    It was definitely a contentious part of the divorce because the company was doing very well. Turns out I started this company six months after I, you know, we called it quits and I’d moved out and you know, stuff like that. So then, that was part of the divorce issue was … then they were trying to argue that while we weren’t quite over yet, and you hear about this stuff and unfortunately I had to live through this stuff. So, turns out her companies did very well, as well, so, you know, in the end we were just like okay, you keep yours and I keep mine and let’s just leave each other alone.

John Warrillow:             Got it. Right. Because in a divorce, you, you know, the value created while you’re a couple is what is sort of in question, as I understand it.

Jean-Eric Plamondon:    Exactly.

John Warrillow:             Got it. Fascinating. Did you buy yourself any sort of trophy or reward for when you sold? Was there any sort of memento that you bought to kind of commemorate the experience?

Jean-Eric Plamondon:    Trying to think. I mean, one of the things I did, is I … I bought a four-plex in Winnipeg and it’s not very … it’s not a memento per se, but it is the antithesis of what I’ve built as a company with Prairie Metals because … and I went ahead and way over renovated one of the units that I now live in because it now signifies stability and security. So, you know, no matter what my business is doing, I pay no rent and I live for free and yeah. And I’m still in today.

John Warrillow:             You know, they say that’s the one benefit of real estate. Like it’s never going to zero. It may not go up as much as a stock or a bond or whatever, but it’s never going to zero so-

Jean-Eric Plamondon:    That’s true.

John Warrillow:             … it’s a … it’s fascinating. Well, listen, it’s amazing to hear this story. I know people are going to want to reach out. What’s … what are you up to now and where can people find you if they want to reach out? Are you in Winnipeg or-

Jean-Eric Plamondon:    Yeah, so I’m based in Winnipeg. I do have my son back now and that’s exciting so I decided to stop buying companies for a little while. You know, buying, fixing, selling, all that stuff. And make … helping other companies do that as my primary. I did that as my secondary for the last 10 years and now I do that as my primary.

Jean-Eric Plamondon:    I do have a website. It’s called GrowthStrategy.ca and, yeah, they can reach out and speak to me through there.

John Warrillow:             And we’ll put that in the show notes, builttosell.com, as well as the link to the explainer video and your website and so forth because I’d love for people to check out the explainer video. It is such an amazing story of remaking and repositioning a business and taking an ownership in a certain, in a new category where you’re the leader of one. So I appreciate you sharing this story and let’s stay in touch. Thank you Jean-Eric.

Jean-Eric Plamondon:    Thank you John! Appreciate it. It’s a lot of fun.

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