Ken McLaughlan & Stephen Gosk: Lease or Buy Your Equipment - PODCAST TRANSCRIPT

Editor's note: The following is the transcript of a live interview with Ken McLauchlan and Stephen Gosk from MetalForming. You can read the interview below or listen to the podcast.

Intro: Welcome to Roofing Road Trips with Heidi. Explore the roofing industry through the eyes of a long-term professional within the trade. Listen for insights, interviews and exciting news in the roofing industry today.

Heidi J. Ellsworth: Hello and welcome to another Roofing Road Trips from RoofersCoffeeShop. This is Heidi Ellsworth, and wow, we just returned from an amazing METALCON 2023, and we wanted to talk to the experts in machinery and equipment, and what's happening after METALCON. We asked Ken McLauchlan and Stephen Gosk to visit with us today, and we're going to specifically talk about leasing or buying your equipment. Gentlemen, welcome to Roofing Road Trips.

Stephen Gosk: Good morning, Heidi. Good to be with you.

Ken McLaughlan: Morning, Heidi.

Heidi J. Ellsworth: I have to tell you, METALCON was amazing. It was so busy. The big reveal with your new equipment, it was really, really great. Congratulations to both of you, and to the overall team.

Stephen Gosk: Thank you very much.

Heidi J. Ellsworth: One of the things, when I was at METALCON, and we were looking around at all of these beautiful machines that you had, I'd like to start out with, first of all, and I almost forgot, I got so excited about the machinery, but let's start out with introductions. Then I want to talk a little bit about what you had in your booth, so that everybody who wasn't there can know what they missed a little bit. Ken, why don't we start out with you. If you could introduce yourself, tell us a little bit what you do with MetalForming.

Ken McLaughlan: Great. My name's Ken McLauchlan. I'm the Vice President of Architectural Sales, so I oversee and work with our sales team, with all of our equipment in the architectural market space, directly tying into METALCON, and the sheet metal business in general for exterior work.

Heidi J. Ellsworth: Excellent. And Steve?

Stephen Gosk: Yes, good morning. Steve Gosk, I'm the President of MetalForming. Responsible for the complete organization here, which represents numerous high-end suppliers for the metal forming space. Our role in that includes all the sales functionality, but also all the technical service support, field technical support, inventory and such that goes with that.

Heidi J. Ellsworth: I have to tell you, Steve and Ken, I was so impressed, overall, with all of that. Let's talk, just real quick. Ken, we had you at the very beginning of METALCON. We were live. Talk to us a little bit about what was in the booth at METALCON that you all were showing.

Ken McLaughlan: Yeah. This year we were able to premiere the new Stolarczyk, must see, slitting and cut the length line, which is about five years in the process of development. We listened to customers, their concerns, their questions, we talked about all their needs. We worked together with one of our suppliers, and came up with a machine that we feel addressed 100% of what the customers were asking for. Not only in feasibility, but also in financial space and turnaround. We were really excited about that process. It was busy the entire time we were at the show, and it was just a great debut for us overall.

Heidi J. Ellsworth: Yeah, it really was. Steve, what did you see talking to the contractors, talking to the sheet metal shops, everybody who was coming into your booth? What was some of the feel you had for the current economic environment, and what they were all talking about?

Stephen Gosk: Well, first let's start, Heidi, beyond the slitter we had from Stolarczyk, which was our big reveal. We had about four or five other innovative products in our booth. It was very interesting for me to see the activity level, and the interest level, from the contractors coming by the booth, to see not only the Stolarczyk's slitter, but also the various other products we had from our suppliers, and some of the innovation those products could offer them, and what they do day in and day out. The activity level was just fantastic.

As we've talked in the past, I'm now about a year into this with metal forming, and so I'm relying on the historians, like Ken, who can go back and reference the '90s, and some of the past METALCON events, which had activity levels similar to what we saw the other week, back in Vegas. It was exciting to see what's going on, and you pair that into your question around the impact of interest rates. We're watching the high interest rates, and what they may or may not do, overall, to the activity level in this space. It's something that I wish I had the perfect crystal ball. I'd say at this present time, there's the obvious. Interest rates surely are having an impact on new housing starts, and that's a piece of the market that our contractors naturally serve.

But the interesting piece of that is, about 90% of what goes on, residential roofing is actually refurbishment and replacement. Some of that is somewhat insulated, in my view, from the activity that might be impacted by the interest rates themselves on new home construction. The other piece of it is how strong is the industry, and are people requiring and needing to actually go out and get financing for some of their equipment? Based on what we saw at the show, I'd say there's still a pretty robust environment, that perhaps the business activity and level of activity that's out there will not require people to have to go get that financing. But those who dom and need to go out and find the financing alternatives, that higher rate, I think, will have perhaps some impact in their decision making.

Heidi J. Ellsworth: That's really interesting, the fact that you're such a robust market or industry right now, that some are not going to need financing, and be looking at obviously purchasing this year, hopefully, definitely going into next year. I'm going to follow that trail right there, because I think that's really, really interesting. Ken, you were talking just earlier about there are some tax incentives for people to purchase this year, whether that's purchasing, or outright buying, or financing. Talk a little bit about that.

Ken McLaughlan: For years, in our industry, certain times the government is in, they've made incentives. 179 has been one of the incentives, that was around for, it seemed to be forever. Every year they talked about taking it away. The last couple of years, it actually has become diminishing. It's on a reduction, that it's gone from 100% to 80% of the investment dollar, against your taxable income. Right now, it will go drop another 20% this year. It's a huge incentive for contractors that are having a great year, that are working with their financial professionals, their CPAs, to say, "Hey, we've got this opportunity to be able to invest money in our company, that goes against our taxable income."

You get a lot of people taking advantage of that. That's definitely something to talk to your CPA or your CFO about, to have them get involved, and then applies with any capital purchase within the parameters of 179. You definitely should be taking a look in at that, whether you're buying a new machine, you're leasing a new machine, the incentive is there.

Heidi J. Ellsworth: Yeah. I think that is one of the things that we need to... I'm so glad we're talking about this, because we need to spread the word on that. I'm sure a lot of people, in a lot of sheet metal shops, folks already know about it, but were people talking about it, Ken, at the show, at METALCON? Did you hear some people aware of what was going on with 179?

Ken McLaughlan: Correct. There's always a lot of people that they say they understand it, and I'll say, I'll put myself in that column. I don't understand it well enough, though, to define it, but your tax professionals are key in this. Your CFO getting involved and trying to figure out where the investment funds can go, and how that works for you and your company. Everybody seems to murmur about it, and a lot of people wait until the last couple of weeks, when the accountant walks in, or your CFO walks in, and says, "Hey, listen. By the way, we need to spend money, or we're going to spend more money with taxes. It's one of the two. You're doing one or the other, what would you prefer to do?" I've yet to find a contract that rather pay additional taxes than get some new equipment for his team to make his business stronger.

Heidi J. Ellsworth: Exactly. That's key. Okay, for those contractors out there, who are looking at buying the equipment outright, what are some of the pros and what are some of the cons, about buying that equipment outright? Ken, let's start with you.

Ken McLaughlan: I think anytime that you're looking to buy equipment, there's three ways to do it. There's purchasing in outright cash, or equity from within the business. There's lending money from your bank, or lending money from an outside institution. I don't think anybody would argue that if you have the cash available, it's always nice to do it, but in these times where everybody's a little concerned about interest rates, and everything else, they're also concerned about where the market's going.

Putting a bunch of capital expenditure out makes it easy for you. You don't have to sign a loan paper. But at the same time, now you're taking risk of taking that cash fluidity out of your business, and moving it into a piece of equipment. That's the good and the bad. The great is that it doesn't have an effect on your business. The negative is that it takes away some of that liquidity that you have.

Heidi J. Ellsworth: Yeah. Looking at the same thing, when you're talking to your customers, and Steve and Ken both, as they're thinking about leasing, say they just don't have that floatie, or maybe they're a company that wants to start getting into sheet metal and they need to make that first stop. What are some of the options for them out there around financing, and how does that compare to leasing? Whether you're borrowing from the bank, or you're leasing from someone else, talk through that, and what their options are.

Stephen Gosk: Yeah, I think first and foremost, as a supplier, we need to be cognizant that our customers have different needs, and essentially offer up different pathways depending on what their business situation is. You touched on one that I happen to really enjoy every time that type of customer comes in the booth, and that's the contractor who's deciding to get into fabrication, and they're looking for those first machines that would allow them to manage their costs, control their own schedule and such, and then sell product to third parties. They come in the booth and they're looking for the machines, but there's also other pieces of this. Because with this, typically, they need to build a facility to house those machines, and there's other costs and impacts in their business, with added employees and things like that, that come into play.

It's very difficult, from a supplier side, to truly 100% understand all the dynamics that our customers are faced with. I think it's very important for us to basically provide them with various options that suit their needs, and have that flexibility here. For us to be able to go ahead and provide contacts and information into third parties that support the business direction they want to take. Actually, as a company ourselves, we're not doing that financing directly, but we're making those connections for the customer so that they can pursue what option makes the most sense.

Heidi J. Ellsworth: Those kinds of connections are the most important, because sometimes you just don't even know where to start. Ken, you've been doing this for a very long time. As you're really sitting there with, whether it's a sheet metal shop, a contractor who's starting a sheet metal shop, or some of your very, very large manufacturers, that I know you work with too. What's some of your advice in looking at this, buying this year, next year? I know the 179, but there's a lot of different options. What are some of the conversations you're having?

Ken McLaughlan: Yeah. I think the big thing is always looking at what the needs of the company and where the company's going. A lot of these companies walk in, and they've sat down, and they've invested a bunch of time, and money and knowledge from their group to say, "This is where we're going, this is what we're doing, and we need to look at some different equipment to achieve that." Some of this equipment lead time is dramatically longer than others. Some of you can come in to Peachtree City today, and pick it up on your trailer and take it home. Some of it we order it today, and you'll get it 14 months from now. There's challenges with equipment, too, that you really have to through as a group, and I think that's really why it's important to have a partner in this that's trusted, and has expertise in it, that allows them to help you guide down the path.

The same thing when it comes to how to spend the money, or how not to spend the money. There's really just those three ways, without breaking into the little minute pieces. But there's spending your own equity, your cash. There's going to your bank, your lending institution. Which is good because it's usually a lower rate than going to an outside one, but it ties up your line of credit, which with a lot of these contractors, their work's seasonal. They don't have that constant flow of cash, so they're trying to plan for things.

We've had some of our partners, that do the lending, come up with some great incentives for our contractors, to where they had deferred payments, and they were looking some different creative ways of helping them fit this into their budget when they're doing extended periods of time. I think it's really important, if the contractor's got an idea, they're thinking out about a path they're trying to go, or the fabricator, and this is the next big thing for them. It's really important for them to get with somebody that understands what the role is. Then it's important for the contractor to understand it as well, that there are those three different lines that you can go to. Your risk is varied a little bit with all of them, but based on your business structure, will allow you to make the best decision for your company.

Heidi J. Ellsworth: Yeah. I'm always intrigued. Obviously, fabricators who already have their shops, and great production facilities, they know where they're at, and they may be looking at that must-see from METALCON as the next big purchase. But for contractors, or even, I talked to a lot of contractors who are like, "I just want to get into sheet metal fabrication." That's where they want to go. It either supplements their business, or I've talked to a number of them who have just totally changed their business model and gone that way, and focused on training and on fabrication. For someone just starting out, if you were going to prioritize, what should you buy first? Ken, what would you say?

Ken McLaughlan: Yeah. Anytime you're going to ask that question, I can tell you what people buy first, predominantly, and I'll tell you what they should buy first.

Heidi J. Ellsworth: Okay, good.

Ken McLaughlan: This entire world's about job control when it comes to that, about how do you maintain the most consistent face forward to your customer is the contractor trying to control things, and that really falls into trim 90% of the time. Whether or not you're a shingle roof, or you're a flat roof, or you're doing tile, you're doing metal, you're doing wall applications, you're doing anything in our space, trim is always the most difficult part, because it's the first thing that has to go on, and it takes some time to lay out.

Folders, and shears, and fabrication equipment to make that trim, is always what I would consider to be the first step, because it ties into the entire business model and allows you also to be able to do work for other people from there. That would definitely be the first. That was one of the things we did at METALCON this year, with one of our partners, Schechtl. We offered what we called a roofers package, which was a folder, a shear and a box and pan tooling, that allowed them to do 99% of the fabrication that they'd have to do for trims in all of those workspaces.

That was a great incentive. We had great response to it. People just basically saying, "You know what?" And Steve makes jokes about this, but every trade show we go to, he has somebody walk up to him, and go, "Hey, I'm just getting into the business. I really don't know what I need to buy, but I know I need to buy something." That's this package, and why I was put together. We could almost call it the Steve Gosk package, pretty soon. He's the one that drove it.

Next steps, after that, you see people getting into other forms of production, whether it's a roll former for making standing seam panels a little bit more specific, or whether you see it in a little longer processing equipment. Moving away from the traditional 10 and 12-foot lengths, and moving into 21-foot lengths, which ties into our Jorns partner that was with this show. Marc actually celebrated his 50-year anniversary this year too. I forgot to mention that earlier. That was an important part.

Heidi J. Ellsworth: That's right.

Ken McLaughlan: In that production thing, just starts talking about different gauges. What we're talking about in [inaudible 00:17:38] architectural space, we talk about lighter gauges, anywhere from 29 to 22. A lot of the industries moving into heavier gauges are thicker, not only being steel, but being aluminum. We start talking about processing equipment that allows you to bend the heavier gauges of material. Which, this year, we represented with a brand new thing to METALCON, with their Schroeder machine we had, which we were hemming 14 gauge flat, which was astonishing to most people walking down the aisle way. It grabbed more people's attention when they walked by, and they're like, "What gauge is that?" That let them see something different that they're getting in.

Then processing, this coil slip to length. Then the other one that we tie in, that's the misnomer in our group, is software. Everybody has something, but not everybody's works good with everything, and so it's always important to do that. We had Randy and his team from Bendex in our booth. They were able to talk to contractors about that. First one, I would say fold like fabrication equipment, that what we consider to be entry level, but really isn't entry level anymore. It's automated folders and shears. Moving into that, from role forming into production software. There's so many avenues for people to go, and that's the great way. When you start a business off with that first step, it lets you grow your business into the next level of where you're going.

One of the biggest things that can add on this is the success story you hear from people. When they said, "I started out doing this, and then I bought this first piece of equipment, and I'm replacing that equipment with something else because it's been successful." It's a great place to sit there and listen to a contractor, or somebody look at you and say, "The equipment that you helped us with has allowed us to increase our business and be a better person, better company, within the industry."

Heidi J. Ellsworth: Yeah, that's exciting. Those are the kind of, we talk about it all the time, diversification, differentiate yourself, all of that. You've really got me curious. Steve, as you were in the booth, and this great starter package, basically, what were some of the things that you heard from contractors as they were looking at this?

Stephen Gosk: Well, I think the most important is, is they're looking for the expertise our team offers. We are able to talk to them about what they're doing today, and what they want to do five years down the road. Really understand that, and then get into the equipment that we offer, the service support that we offer, that best aligns with those needs. Whether it's our machine, or a competitive machine, let them go in with as much knowledge and information on the capabilities of the product offering so that they can make a well-informed decision.

Just like they're leaning on their tax accountant for decisions on lease, versus buy, versus what makes sense, I see them coming to the show, looking at the equipment and talking to us in that same fashion, for us to guide and assist them into what product makes the most sense for them based on what they do. I mentioned it before, I'm very proud of our team. When someone's looking at a machine, that perhaps might be overkill, we say, "You don't need that. You can get away with this machine over here. Less of an investment, but makes more sense for what you're sharing with us in your business." I think we go down into those details, whether it's at a show...

Interesting story. I was at the airport, flying home on Friday, and I'm in my MetalForming shirt, and actually had someone walk up to me, right after security, and indicate that they had come by our booth, but the booth was so busy they really didn't have a chance to get and talk to anyone. But they were in the same situation, looking to buy equipment, as they wanted to get into the fabrication out of the Texas area. We were able to share with them. They could come to our facility, here in Peachtree City, and we have a full demo room, showroom of equipment, for them to go through the same discussion, but with more than enough time, and the same people to talk through the details. It comes in a lot of different forms, but really, people leaning on us for our expertise, and all the different variety of products that we can offer them in one location.

Heidi J. Ellsworth: That is cool. How great. And you know what? I've had that happen before too. All of a sudden you see someone in airport, and they're like, "I didn't get to talk to you," and the show just goes on. You, actually, Steve took us right where I wanted to go. It's how to get started. For those contractors who weren't at METALCON, or who maybe weren't able to get time in the booth, I love what you're saying about coming to Peachtree, and actually spending time with machines, learning. To me, that makes so much sense. Talk a little bit about, and Ken, maybe, as people are talking to the sales team, how do they do that? How do they schedule that? How do they start down this path, of really sharing their goals, and working with you to take that next step?

Ken McLaughlan: Yeah. I think the important part, and I want to touch on one more thing too, in addition to this, I just thought about. In addition to this financing thing, I wanted to really stress the importance of the team that's here to support it. The team's got everything from engineering, to roofers, and sheet metal guys, to technicians, to both precision and architectural. So when you call in, we really want to understand your business.

That's the biggest part, and Steve hit on this. We don't want to oversell people on things. I hate to say this, we're not a sales organization, but we're an organization here to educate, and to help the customer pick the right thing, give them the opportunity. We'd love them to reach out to us, whether it's via email, via phone, but give us a call, talk to us. If you can fly into Atlanta, we're 37 minutes away from the airport. We've got over $3 million dedicated to our demo floor, in equipment that's sitting out there right now that we can bend anything from the lightest gauges we see in our industry 0.18, that we've got a machine out on the floor right now that'll bend five eights plight. We can find a solution anywhere within those for them. But the biggest thing would be to reach out to us, either at MetalForming.netusa, or pardon me,-usa.net, or give us a call, and we can definitely get something scheduled. Our sales team's here from 8:00 to 5:00 Eastern time, but whatever works best for you on that.

Heidi J. Ellsworth: Silly question, but I think people may be thinking this. Okay, so they're going to do this, and they get ahold of you. Who should they bring from their office, from their production? Who should they bring to see the machines and do the demo?

Ken McLaughlan: Yeah. I think the people, having really good plan is in place, but where we seem to have the best results is when you have the people in the end that are going to end up using it that are somewhat involved. But depending if it's a brand new experience for you, if it's something you're manifesting on, or growing from, the shop foreman, the business owner, because he's the one making the commitment, whether it's the facility engineer. We see a little bit different between the mix in our customers, too, that we'll have facility engineers that walk in, whether they truly need a solution. Then we have contractors that walk in, that know what they think their solution is, and we just have to find the right machinery for them. We would welcome all and any to show up with what the plan is, and we can walk through as a team.

Heidi J. Ellsworth: I love it. Just as a last thing, ongoing. We're talking here about leasing, buying, financing, but let's talk just a little bit. If you are making that decision to buy this year, however you're going to do it, whichever works best with you, and your tax accountant, and your CFO, but there is ongoing training and service that goes on way past the purchase. Steve, maybe just talk a little bit about that ongoing relationship, that ongoing maintenance and care for the machinery, once it gets out into the shops and it's in production.

Stephen Gosk: Yeah. With that, there's a lot of options that the customer has with us as well. But most importantly, we have a full group of field tech, service techs, that are available, more than, at least best I can tell, with any of our competitors in the industry, including a variety of backup technical support that resides here in the office, and applications. As well as online technical support of the machines, where a lot of the issues, actually, in today's world get resolved by us getting online with that machine and seeing what's going on.

We have a full gamut of support folks here within the organization that are available. Depending on the customer size and scope, that could be servicing their need with a sense of urgency, if they're down for some reason, or are having issues, all the way to folks that are a little bit bigger, and have multi facilities, or locations where we could set up service level agreements, preventive maintenance agreements, so that we regularly come out and take a look at the machines, and make sure that the service that's being desired is getting completed in a timely fashion. Different options, depending on the customer and the customer's needs.

Heidi J. Ellsworth: That is great, because I think that's important too. Whenever you buy something, you want to know that they're going to be there, to have my back, to help us to make sure our crews, all the folks are trained. Ken, last thoughts for all those contractors, or sheet metal shops, or fabricators over there? Timeline, now's the time, I would think. We're at November, we're right at the beginning of November, and so we got two months left in the year.

Ken McLaughlan: Correct. We've got two months left in the year. We've got inventory in stock that you can take possession of immediately, in some of the lines. We still have the availability to order some of the custom machinery prior to the end of the year, depending on the application. Reach out to us, give us a call. Let us know how we can help. Our group is in here answering the phone, and following up on show leads, which I have to stress that METALCON this year was like METALCON from the 1990s. It was a great experience. It was almost overwhelming, to be very honest. We're excited from that. If we didn't get the opportunity to talk to somebody at the show, like the gentleman that Stephen met up with, please reach out to us. Feel free to give us a call, come by and visit, whichever works best.

Heidi J. Ellsworth: I love it. I love it. Well, thank you both. This has been so great and I hope this helps all the contractors, and sheet metal shops, everyone who's out there, with some of their decisions, or at least a direction for next steps, or starting a new division within their company. Steve, Ken, thank you so much for being on this morning.

Ken McLaughlan: Thanks, Heidi.

Stephen Gosk: Yeah, thank you. Appreciate your time.

Heidi J. Ellsworth: Thank you, and it was great. Thank you all for listening. We want to keep bringing you these type of topics that will help you grow and differentiate your business. Be sure to check out all of our podcasts under Roofing Road Trips, under the RLW navigation, on both Metal Coffee Shop and RoofersCoffeeShop. Also, on your favorite podcast channel, please subscribe and set those notifications so you don't miss a single episode. We'll be seeing you next time on Roofing Road Trips.

Outro: Make sure to subscribe to our channel and leave a review. Thanks for listening. This has been Roofing Road Trips with Heidi from the RoofersCoffeeShop.com.