Ken McLaughlin and Stephen Gosk: The benefits and pitfalls of buying used - PODCAST TRANSCRIPT

Editor's note: The following is the transcript of a live interview with Ken McLaughlin and Stephen Gosk from MetalForming. You can Read the interview below, Listen to the podcast or Watch the recording.

Heidi J Ellsworth: Hello, and welcome to another MetalCast from MetalCoffeeShop. My name is Heidi Ellsworth, and we're here to talk about some things very important for the end of the year, and is buying equipment, and especially what do we talk about in buying used, new? What are the pitfalls? We've got the experts from Metal Forming to talk to us about that today. I would like to introduce Steve Gosk and Ken McLauchlan from MetalForming to join us today. Hello, gentlemen.

Ken McLauchlan: Good afternoon, Heidi.

Stephen Gosk: Heidi, how are you?

Heidi J Ellsworth: I am good. I'm so happy to have both of you here, and from what I understand you've just gotten back from Europe, and quite the tour, seeing all the greatest new advancements in machinery.

Ken McLauchlan: Yes ma'am. We just got back from a big whirlwind tour of about 12 days with our partners over in Europe, visiting factories, working with our partners over there and really getting an opportunity to spend some one-on-one time with them, their management team. So it was a really great visit. Enjoyed Europe, enjoyed the winter season and we're back and happy to be working on finishing out the year.

Heidi J Ellsworth: I love it. And, Steve, this is your second year, right?

Stephen Gosk: Yeah. We did this last year at the same time, and it is really a great time to sit down with them and talk about what our plans are for next year and we plan to work together to achieve those. But most of all, from the machinery aspect it's a really good time to provide them insights as to what we're seeing in this market for machine requirements, and influence their product roadmap for the future, and give them insights to our customer base.

So it's always a worthwhile discussion. We get a lot done face-to-face, and, as I said, this time of year is a good time for us to kind of lock in and get prepared for next year.

Heidi J Ellsworth: I love that, because there's a lot going on out there right now and there's a lot of need... And you know what? I jumped right into it because I was really excited about your European tour, but let's be sure we get our introductions in. So, Steve, if you could introduce yourself, talk a little bit about MetalForming and what you do?

Stephen Gosk: Sure. My name is Steve Gosk. I'm the president of MetalForming. As Heidi mentioned, I've been here just over a year, but responsible for the operation here. MetalForming sits between the customer and supplier, so on one side we're trying to work very close with our suppliers to make sure we're having the products on market, the right attributes in those products and we service the customer well.

Then on the other side, for the customers we have to do that value to them, and in between we are there to be their expert, someone that they can count on for a variety of different products that they need within their operations. We're there from everything from the sales through the service startup and support.

Heidi J Ellsworth: That is great. And, Ken, please introduce yourself and tell us a little bit of what you do at MetalForming.

Ken McLauchlan: Yep. My name is Ken McLauchlan. I'm the vice-president of architectural sales. I've been here officially almost a year January 2nd. I came over to be part of Steve's team when he assumed the leadership role here. I oversee our sales team and work with our customer base, from everything from folders and shears, to hand tools, to roll formers, trying to solve their needs, have discussions.

We have a very informative sales process here, so we try to be educational and informational, so collecting data, making sure we're doing the right thing in moving forward, and I've been in this magical industry for about 33 plus years now, so involved in a lot of machinery purchasing for a lot of years, but now really excited to be part of this team and be working with our group to bring solutions to the market.

Heidi J Ellsworth: Yeah. You guys have had an amazing 2023. It seems so fun to be partnered with you, to watching everything that's going on, such amazing growth. Today we really wanted to talk a lot about that used equipment marketplace. So, Ken, maybe starting with you, what are any... I know I'm seeing on our classified ads there is a lot of used machinery. People are buying new, selling their used. What are you seeing on the equipment marketplace and around availability?

Ken McLauchlan: This year's been one of those things... So we've really had a lot of people having great years in the construction industry, and it gets to this point of the year and everybody starts thinking about, okay, what do I need to do? What am I looking at? Where's my next business model?

We have a lot of people that are looking for not as much automation as new technology. We want to see how do we increase the process in our facilities? How do we see people improving that process to get more out of the same amount of space and basically make the workflow a little easier on the employees?

We've watched a whole bunch of this happen, where we've had people say, "Hey, I need to invest in new equipment," and we had a whole bunch of people come in and say, "Hey, listen, I need some replacement equipment that's maybe not new," so it's been a little bit all over the place.

But our last two weeks have been phenomenal. We're making jokes about that we're not supposed to come back from Europe anymore. If we have weeks like that when we're gone we need to be gone more often.

Heidi J Ellsworth: I love it. I love it. Steve, what do you seeing in the marketplace?

Stephen Gosk: I mean much of what Ken's saying. It's still very, very active out there. It started with the MetalCon show, in the activity level and in the attendance that it had, and much as anything the quality of the attendants at the show. And even though we're in the last quarter of the year, it's been extremely active. There's been a lot of different programs and projects in our world, both on the industrial fabrication side as well as the architectural metal side. So that's a good sign, and so we're fairly bullish as we go into 2024.

Heidi J Ellsworth: That makes me happy. I know you're going to be on one of our MetalTalks, Steve. We're going to be talking more about 2024, so I'm excited about that, because it's always nice to get our crystal balls out this time of year and kind of look around.

But I do want to talk a little bit about the contractors who are looking to buy used machines, because I think there's a lot to consider in used to new, as you gentlemen are the experts on this. But one question, Ken, and I kind of want to start with this.

When you guys buy a used car you know it's used, you know you can probably get parts. You know you can do all those kind of things. But what about when you buy a used machine? How does that work? How do you get service? How do you get parts? Is that all part of the program, or what should people look for?

Ken McLauchlan: That's a great question, Heidi. A lot of the question comes down to the year of the machine and where the machine is from. We have a lot of people that are trading in 20-year-old machines with us, because we'll take our brand of machinery back in trade, refurb and sell them at a basically factory OEM type level, with not current software.

But while people are doing that on a regular basis, we also see a lot of people calling and saying, "Hey, listen, I found this machine at an auction, I found it here, my buddy wants to sell it. This is what's going on. What are your thoughts?" Any of the brands that we carry, we are more than happy to have discussions with you.

There are times when parts become obsolete and you can't get them anymore, so it's always important if you're looking at used to understand the risk you're taking. Obviously there's a benefit of cash in dollar amounts that you're getting into, that you're saving money which might fit your budget and allow you to actually put a piece of equipment in when you couldn't afford it new. You just want to make sure that the parts are available for it, because the service is important, but if you don't have parts to put into it makes it really difficult.

So I would say if you're looking at a used machine reach out to the manufacturer of the machine, see what's there. There's a lot of companies that five or ten years ago that were here in the boom before 2020 that aren't here anymore, so you want to make sure that that's available to you at the very least.

Heidi J Ellsworth: I think that's such great advice. And, Steve, if you kind of take that one step further, you have as part of your core values at MetalForming, it's very customer centric. So, Ken, I just loved what you just said about hey, if you're thinking about it just call us and talk to us. Steve, why is that so important to have that kind of partner when you're looking at buying machinery used or anywhere?

Stephen Gosk: Yeah. You know, I say this all the time. I'm really proud of our team, the approach we take, and we do it every time, is ask that customer what they want to do today and what do they want to do five years from now with the machine, and really begin to understand what the customer's need is, and with that guide them into the machine that best fits that need. That could be used or it could be new, depending on where that customer's business is at.

First and foremost, I think it's important for us to understand exactly what they're trying to do with the machine itself. For us here, we see the refurbishment used market as a pillar for the future, so we're going to continue to put emphasis and focus on that aspect. We're working with our suppliers to assist in us doing that with the parts, but particularly on the folders. The brains of the folder is the controls, and our partners will offer a complete refurb of the controls cabinet, have a set in place where literally all of the electronics are placed right into the same sized cabinet that exists with the machine.

So the rest of it's pretty much a lot of heavy steel and mechanical parts, so if you can get the controller... And with Schechtl particularly in our line, they'll go all the way back to 2001, so going back 20 plus years where there is an opportunity to retrofit.

So depending on, again, where the customer's business is at, it may be more in line with their financial and business needs just to simply replace that controller and continue on with it. They get a warranty from us on that. We can do the work here, or some of it can even be done in the field. So, again, it really depends on where they're at today, where they want to go, how much money they have to invest and what machine capability they're trying to get to in their business.

Heidi J Ellsworth: You know, what you just said there, that really kinds of hit home to me, because I'm thinking of folks out there who have a sheet metal shop already, and so they have a shop, and they are trying to figure out should I trade it in? Should I refurbish it? Do I buy something else to go with it? So, Ken, you've been doing this for a long time, and when you're looking at those sheet metal shops out there right now for the contractors, what is some of the things that they should be thinking about as they're looking at their shop right now on going into the end of the year and making investments back into the business?

Ken McLauchlan: I think the big thing that we've been really hitting on was with equipment, and I was just thinking while Steve was talking about one of the customer relationships we had just recently, where a gentleman called up, was talking with one of our salespeople, I happened to get involved in the conversation, and he said, "I've had a Schechtl for 20 years. I'd like to get a new piece of equipment because I've had a good year, and I'm thinking about selling this piece of equipment. What's it worth?"

So we gave him some ideas on what it was worth. We gave him a number for trading it in so we could refurb it, because it was within that window. Then we said, "There's other partners, and you guys are one of those partners that have RoofersCoffeeShop in the classified ads."

We said, "Listen, we're going to give you a certain number for this. We're going to take it back. We're going to refurb it," pardon me, "we're going to bring it back to our location in Georgia. We're going to refurb it. We're going to tear it all the way down, repaint it, it's going to leave here looking like a new machine again, put a new electrical cabinet and everything on it, and then we're going to sell it with a warranty. There's a cost to that. You can sell it outright. You could sell it on RoofersCoffeeShop, or you could sell it to a competing company in your market," and that's another option.

And then a lot of the times the option when somebody says, "Hey, it's working fine, but I just realized I need to reinvest," my answer all the time is, "Do you want some redundancy? Is your business going to grow? Because if you're making one 10-foot piece, could you make two 10-foot pieces at a time? Do you have some downtime? It's a little bit of a backup. Do you have the space for it?"

So it's always a question... That's part of that sales process, the informative part, is how do we become a good partner with our customer? And you get somebody who calls you and says, For 20 years this has served me well. What do I do," you want to make sure that you give them every answer that you can.

Heidi J Ellsworth: Yeah. Yeah. That's brilliant. I think that's just the way to go. Now there is... And I want to make sure we bring this up. There is an incentive right now too to be doing that, to reinvest in your business, whether it's through redundancy, refurbishing, buying used, buying new, all those things. So, Ken, just talk a little bit about some of the tax incentives that are going on.

Ken McLauchlan: So right now, we have a national tax incentive, 179, and I'm going to first start off by saying I'm not an accountant or a CPA, but you should talk to yours, because right now it's an ascending incentive tax, and it used to be 100% deductible two years ago. It went to 80% this year that you could take it off your taxable income. As of next year, in less than 30 days, it will go to 60% next year, which is a dramatic number. So when somebody has the ability to take 80% of that purchase value and apply it to their taxable income for the year, it's a great incentive for a lot of businesses that are having a great year.

So, again, talk to your tax professional, talk to your accountant, see what they have to say, but that is there and it's available for you. And that's the lion's share of what's walking in the door right now for us, is the contractor got back from Thanksgiving and he's taking an initial look at how my year is going to finish. He's talking with his accountant. His accountant says, "Well, you got a couple different options here. You can get prepared to write Uncle Sam a check, or you can invest back in your business and use it as a deduction."

So a lot of the people... Just yesterday we had this happen, where people walk in the door and they're like, "We don't understand this." He got on the phone with his accountant after we talked about it. His accountant called him back and said, "You need to figure this out. Get something that they have. It's a good thing. They're not telling you a story."

There's parameters around that you have to abide by to do it, and that's why I think it's really important to talk to your accountant, but we're more than happy to help steer as much as we can with that.

Heidi J Ellsworth: Such an important time, and there's not a whole lot of time left, so you really do have to act now. So for those folks who are looking at starting a new sheet metal shop... There's a lot of contractors out there I saw at MetalCon who I'm sure you all talked to and they're like, "We want to start our own sheet metal shop." So, Steve, when these contractors are looking to buy used, buy new, starting brand new sheet metal shops, what's some of your recommendations?

Stephen Gosk: I hate to say it, it really depends... And to your point, one of my favorite things is typically at a show we have at least five or ten people walk in the booth, they're roofing contractors, they're going to get into fabrication and they're looking for their starter set of machines that they need to do that, because it's somewhat of a combination of where they're at today and where they expect to go five years from now, their financial situation and the types of products, naturally, that they're looking to make.

The used machines, they go pretty quickly. I mean in the current market environment at least there is a quick turnover on used equipment, so it has a high demand. So if you're looking for something very specific you may have to go to new to find that machine that's going to do what you need it to do, because it's just not available in the market, or not easily available in the market.

But if you can find a refurbished machine that has been fully refurbished, so for us here that includes getting the machine down to it's bare metal, repainting it, replacing the controller and such, that machine is just about new and you're going to save yourself some money.

Heidi J Ellsworth: Now I think one of the things to think about too is if you're starting a new sheet metal shop you probably need a lot of training. And in the beginning of this we were talking about the benefits and the pitfalls of buying used, so in my mind buying used, if you're just starting out and you need a lot of training and you buy... I mean, I'd love everyone to buy stuff off RoofersCoffeeShop classified ads, but it seems like at that point there is a need for people to really work with experts and be able to get that ongoing training.

Maybe, Ken, you can talk just a little bit about what you provide as support, and how important is that when you're starting a sheet metal shop?

Ken McLauchlan: I think you're hitting the nail on the head with this, and I think a lot of it has to do with that customer too. When you say we're starting a new sheet metal shop, we have people walking into these trade shows that are starting a sheet metal shop that aren't starting a new sheet metal shop, they're literally taking the next step in their business.

So they are starting a business that they've already funded for years. They know what they do, they know what they want and it's important to get the right equipment in their hands. And one of the biggest differences between used and new or pre-owned, and a 20 year old machine and a new machine is the software capabilities of these machines, and that level comes into your employee as well.

This week we had people in here who had purchased a machine that they're doing three days worth of training, that they purchased that as part of their machine install. They wanted to come out, bring their staff out and train with our people here in place. Then there's a lot of people that they hire a very competent person who's worked on a piece of equipment forever, and they can run it tomorrow. So, again, fitting the needs of that customer, fitting the needs of their employees and where that business is going not only today and tomorrow, but the next 10 years, what's the game plan and how do we move forward?

So I think it's very important for that, because every machine is a little different. And one thing we haven't really covered, there's a lot of people that will come out and they'll buy your equipment, or they tell you they're going to sell it on consignment, and basically all that means is they're taking a piece of equipment and they're going to mark it up to what they think is worthwhile, and they're going to sell it, and they're going to make their money off it and pay your money, which is a great option for some people, because they don't want to be involved in that sales process.

However, when you're not getting that machine refurbed and set back to OEM standards, there's where you can have somewhat of a hurdle later in life. So you're not getting trained on the machine by somebody who's factory trained. You're not having somebody go over if it's basically brought it back to factory standards, so I think that's a really key part with new and used, where's the line in the sand?

Ultimately in the end it comes down to financial. None of us want to hear that, but it's no different than walking in and buying a car. Everybody wants to drive off in a brand new shiny car, but sometimes a two year old machine or a two year old car is just as good.

But sometimes I want a new one. I want it with the full warranty. I want it with the training package. I want it installed. And other times it's, hey, this is our third machine, or this is our replacement for an older machine and we're already familiar with it, and we just need to know you can service this.

That's where I think our team at MetalForming can truly be a valid partner to the industry, because we're willing to help through all of that process, and we can, which I think is the big thing that a lot of people can't say.

Heidi J Ellsworth: Yeah. I think that is so important, because you're going to have combinations no matter what. Even if you buy all new, you're still going to have old machines back at the shop that all have to talk together and all have to work together, so you have to have experts on your side.

But one thing, Ken, you said that really hit home with me was about your employees. So really including the operators, the people who are running the machines, and some may be just as fast on older machines because they're so familiar with it, whereas if you're training a whole new generation why not start with all the hot software and everything out there that's making a difference?

Steve, what have you seen with different employees from the companies that you're working with?

Stephen Gosk: And we do see a lot of that. I think the smart business owners who engage the folks who have to live with whatever machine comes in are going to benefit in the long run, and they really truly know what works well for them and what doesn't, so I think that's best practice amongst anybody buying any type of machine, new or used, is to engage the person and have them included in the decision process, depending, again, on the type of industry it is. On the industrial side it's oftentimes a manufacturing engineer. He's the one looking at the efficiency gains, for example. So it comes in some different flavors, but absolutely that's something we like to see.

For us, new or used, with the showroom and the demo equipment we have here, if people have the time, I mean a picture is worth a thousand words. If you can come in, touch, feel, see parts run, I think the direction you want to go, the value in decision making that you come down to from a dollars and cents standpoint becomes pretty obvious, and you can make that best decision for yourself and post-sale you get the same level of service, support and training that you would new or used, so it works pretty well.

Heidi J Ellsworth: It's all about the partnership. It's about the relationship.

Stephen Gosk: It's not a one-time sale. I mean the customer is hopefully a customer for life and gets used to the machine, get used to the controls and wants controls that are similar.

I think the biggest difference between new and used is the technology shift in the world we live in, right? Things like safety that some of the newer machines have and have available for options, for example, if that's an important attribute in your facility, then that's probably going to drive you to more of a new design. As Ken said, the machine you've been working with for years and you just want a backup machine, maybe not as much.

Heidi J Ellsworth: One of the things we've talked about right at the very beginning, but I want to bring it back here at the end, because I think this is important, we talked about with what we do, marketing goals and sales goals and business plans going into next year, but I'm kind of visualizing after Ken, you know, putting together this picture of... Almost a drawing of a shop, what's it look like this year, what's it look three years from now, what does it look like 10 years from now, and how those machines start filling it and talking, Ken, just talk a little bit about that consultative support that you provide in actually putting that long term goal and maybe that blueprint, that pretty picture you can hang on the wall for visualization together for a sheet metal shop.

Ken McLauchlan: So, it's one of the things that I think we do very well. If you look at the depth of our bench at this facility, we were sitting in a meeting the other day and there were two of us sitting at the table with over 65 years of experience. I hate to say that, because it makes me feel old, but it lets you learn from your failures. Sometimes we call it failing forward. We're going to run into it headfirst.

But process flow in a facility, understanding long term goals... When somebody comes in and says, "I want a folder and a shearer," that's great. We want to know, okay, you want a folder and a shearer today. What do you want to do four years from now? Are you going to continue to buy sheets as well, or is it something you want to get into processing material? What are the different parts you're going to make?

We can help lay out shops for people, give them ideas from what we've saw that has been successful, what we've saw that hasn't been successful, and let the owner truly get an understanding, or the shop manager. I think we're really good at involving the teams at the same time, because the guy that's very quiet in the back that's worried about where his next paycheck comes from is the guy we really want onboard. He's the guy that understands what he deals with every day, and what doesn't work, and what hasn't worked that maybe they'd like to see work.

So our facility here, we've actually set that up in our showroom so people can start to get the understanding of it. You can see where the machines fall within the flow, so when you walk into the building you get an idea that says okay, if I have this in my facility I could put this here and this here, and if I wanted to add this later there's an option.

One of the biggest fallbacks we see in facilities we go into is growth, where they've got just things in the wrong place. And it could be as simple as having a shearer and a folder in the wrong order, and it doesn't seem like a minor thing, but it fit better because the electrical is right for that, or whatever it might have been, but for flow wise it was a short term gain and a long term loss.

Heidi J Ellsworth: I love that process flow and putting that plan and that vision together long term. So really we talked about in this podcast, or MetalCast, the benefits and pitfalls in buying used equipment. What it's really about, what it's really all at the end of the day is having the right relationships, where you can do long term planning and get the right equipment, whether used or new, to build your future.

So, Steve, I'm going to just have you kind of take that thought and bring us home on that, because I just love that.

Stephen Gosk: I think it's spot on, and it's certainly as a supplier what we aspire to, and that's exactly the type of value we have to bring to our customers. And, as Ken mentioned, we have a lot of folks in the organization with years and years of expertise of doing this business, and you can trust that we're going to give you our best input and the best result. It's not going to be self-serving in any given way, because it's just like buying the car that you really didn't need. You figure it out sooner than later, and you won't be going back to that dealer.

So these are long term relationships with these various contractors, so we're going to listen to what you're looking for and we're going to guide you in the best direction we know how, and we'll hopefully continue to build out the offering that you have from us over the years to come, and that could be new, used, or the next great thing that comes on the market.

Heidi J Ellsworth: That's great. I love it. And here we are at end of the year. Now is the time. So you gentlemen are going to be busy through the holidays?

Stephen Gosk: We're trying to land the plane.

Heidi J Ellsworth: I love it. I love it. Well, thank you both so much for all this great information, for everything you do for the industry and for all of the contractors out there who are trying to grow their business. This has been amazing. Thank you.

Ken McLauchlan: Heidi, can I add one more thing before we go?

Stephen Gosk: Okay, Heidi. Enjoy the holidays.

Heidi J Ellsworth: Thank you. And yes, you can, Ken.

Ken McLauchlan: I think just to summarize everything we've talked about; I think it's really important for anybody that's listening to this or anybody who's thinking about it, is find somebody you trust, talk to them, hear what they have to say. Know there are going to be hurdles. Understand that. There's never a perfect process. How you're going to look after those hurdles I think is what's going to make you successful in the business.

Roofing contractors deal with it every day, overcoming hurdles. I think it's the same thing with their vendors, and if they approach the business the same way they do the roofing business, I think they'll find a lot more success in it. So really understanding your partners, understand what you need long term and really identify that ahead of time, don't buy the next best thing, buy what you need for your business, it's really important.

Heidi J Ellsworth: That is excellent.

Ken McLauchlan: So, other than that, have a fantastic holiday. Thank you very much for your time. Thank you for the year. We've had some great experiences this year, and we hope to just roll that right into 2024.

Heidi J Ellsworth: I tell you what, it's been fun. I am, I'm really looking forward to 2024, so thank you. Thank you, Ken. Thank you, Steve.

Stephen Gosk: You're welcome. Thank you.

Heidi J Ellsworth: And thank you all for listening. This is great stuff. I'm excited to be able... We've been delivering this. We've been talking about 179 and we've been talking about really talk to your tax accountant, invest back into your business. You have a couple weeks left, so I hope that it all works out, but either way keep doing it into 2024.

Thank you so much for listening every day to all of our podcasts. Be sure to check them all out on MetalCoffeeShop under the RWL Navigation for MetalCast. Also be sure to check out the metal forming directory on MetalCoffeeShop and on RoofersCoffeeShop. Great stuff. Great information. It will help you to really find that consultation with them that you need.

So thank you so much, and please be sure to subscribe to your favorite podcast channel so you don't miss a single MetalCast. Get those notifications, and we'll be seeing you next time on MetalCast.