Episode 256: A Real-Time Growth Story with Spector & Co

Welcome to Skucast, the podcast for entrepreneurs in the promotional products industry. Skucast shines a light on our industry's best work, features maverick personalities, and discusses what's really involved in running a modern promotional products business. Skucast is the official podcast of Common Skew.

Today we're bringing you a real-time story about growth. Specter and Co. began with 5 employees in an 8,000-square-foot facility in Montreal. Rob Specter and his team eventually grew the company to over 300 dedicated staff. Some of those employees have over 45 years of experience with the company. In 2018, Rob sold a part of the company to equity firm Blue Point Capital Partners, in part due to his expansion plans, which include the brand new $5 million facility they recently opened in Las Vegas, giving the reputable and esteemed supplier a strong foothold in the U.S. Today, we're bringing you a glimpse into a part of the real-time growth story of Spectra Co. In January, we traveled to Las Vegas to host SKUCON, and early the next morning, Rob treated us to a tour of the new facility. But this isn't just about a factory tour. Part of our team, Mark Graham and Dave Schultz and I, joined Rob and his VP of Manufacturing, Juan Martinez, to view the progress on site and also to understand how a Montreal-based company considered many different avenues for growth. Parts of today's SkuCast were recorded literally on the road as we drove with Rob and Juan to the facility. And we also bring in highlights from our SkuCon conference that all relate to this topic of growth. We talk about considering the risk and calculated risk, plus how strategic account development might be the crucial key to tactical growth for both suppliers and distributors. The voices you'll hear in today's episode are Rob Spector, President of Spector and Co., Juan Martinez, VP of Manufacturing at Spector, and we bring you clips from SKUCON featuring Katherine Graham, CommonSKU CEO, interviewing Sam Cates, Chief Sales Officer at Spectre, plus some great advice from our friend Jeff Becker at Kodas Design on this subject of strategic account management and growth. Today's episode is brought to you by CommonsCue, the work from anywhere platform that powers your connected workflow, enabling you to process more orders and dramatically grow your sales. To learn more, visit commonscue.com. Now here's our episode featuring Rob and the Spectre and Co team on lessons and strategic growth. You and I love these factory visits. We love visiting with suppliers because there's so much going on. There's so much innovation. There's so much craftsmanship. There's so much artisan work that's happening that we now know we take for granted a lot of the times. But what you and I have always done is we've walked away from some of these experiences and asked ourselves, what did we learn from that? As I had time now to think about our visit with Rob Spector and Juan Martinez and their entire crew and their expansion in the Las Vegas facility, I realized this is an amazing story about growth and, and an obsession around growth and how they can do it strategically and how they can do it right. And Rob shares a little bit behind the scenes of some of the tough parts of actually getting to the point of where they are. So we have a couple of lessons to share today, and this is applicable to both distributors and suppliers. It's all around overcoming challenges to growth and thinking proactively about it. So Mark, what were your thoughts on lesson 1? For me was how the Spectra Co. team had to figure out— it was a truly logistical challenge for them— how to figure out how to take a Montreal-based company, expand into the US, which was, was a majority of their business, which we take it for granted as distributors because we don't have a footprint in manufacturing like they do, but what a challenge. What were your thoughts as Rob unpacks this story about their growth?

Well, what became clear to me is that Spectre is an established brand in the industry, great brand recognition, but their challenge is that they manufacture all of their product in Montreal. And that's a choke point. And by them looking into the US market and making a significant investment on the ground in a US location, building a US distribution center, was really, I think, the only choice that they had if they were looking to continue to grow and penetrate the US market further. Yeah. And that's, I, I think, is a, a scary crossroads to be at because you're standing at that crossroads and One, you could kind of stay status quo, and I think that's fine. You could probably bump along with some good organic growth. Option number two is looking at making an investment in the US, which is going to come at a tremendous cost financially, time, resources. And so it's fascinating where we were talking to Rob as to how he was unpacking that and unpacking the risk-reward and how it is that he chose to make that decision.

And also how they had to consider the fact that, well, maybe we should do all of this offshore. So it's also a micro story about what's happening in North American manufacturing and how reshoring has become a big topic now and a big opportunity. And we're watching this story unfold in real time. Here's Rob sharing the story of their decision and the different obstacles they had to consider.

So we went through this entire exploration to seek out where we could actually find capacity. So the first step was, okay, I'm going to call my China factories. I'm going to see what they can do in terms of, in addition to manufacturing the products, actually inventorying the products, decorating the products, and shipping the products. So I spent weeks interacting with, I think, our top 3 or 4 vendors, top vendor in each category, put down the pricing, and then we went to get the freight cost. We assumed the freight cost would kind of equalize with our domestic labor costs. That would have been true pre-COVID, but But the COVID freight rates, it took the entire scenario out of whack. So we weren't able to do that. Then we looked at Latin America, Mexico, Colombia, whatnot, and, you know, continued to explore Mexico as an alternative. But that wasn't helpful. That, you know, it was very difficult to find capacity there. And then funny enough, one of the first projects that we had when I sold to Blue Point Capital, my PE partners in March 2018 was to open up a USA facility, which we kind of abandoned because we were busy with other stuff. And we're like, okay, what about actually opening up a USA facility? So I go to the— my PE guys, I'm like, hey, we've basically done full circle, Montreal to China to Latin America, and now we're looking at possibly a US facility. And then the funniest thing is I get on a call with a real estate agent in Los Angeles, get on the call with him, and he starts laughing hysterically. I'm like, what is so funny? He's like, you're literally the first person in a decade that's called me wanting industrial space in Los Angeles. And he's like, let me paint the picture for you. And my numbers might be off. He's like, there's 3 billion square feet of industrial space within the Los Angeles area. The— I think there's 2.99 billion rented. So he's like, even if I were to find you a spot, it would cost you an arm trauma in the leg, right? So here I am after this huge high, I'm like, okay, I'm gonna go to LA, I'm gonna open up in LA. And we crushed like one phone call. So then, um, we hired Ken Seidel. I don't know if you guys know Ken. Oh yeah, he used to be with Alpha, right?

He's—

yeah, he's working on the Bella Vegas facility, right? Reached out to Ken, I'm like, okay Ken, here's, here's a story. We were gonna open up in LA, um, that's not gonna happen obviously. Um, we do like the West coast, we had a bunch of people from Sweden who were willing to relocate. So we said, let's do a site selection analysis on the entire West Coast of the US. So he did that, um, and at the same time, Sam kind of put together an analysis, a SWOT analysis, in terms of where we are, how we've been doing, how we haven't been doing really well in the US. And, um, we basically looked at, I think, San Antonio, Houston, um, Phoenix, Vegas, And then me, Juan, Ken, and Angelo came out and we basically chose Las Vegas as our facility.

And was it because of available inventory?

So it's funny because we had, we looked at like the basically the top factors. So freight inbound, cost of freight inbound, time of freight inbound, cost of freight outbound, time of freight outbound, blue-collar availability. Blue-collar cost. So we're sitting at breakfast because our first day was in Vegas. We're staying at breakfast on a Monday morning or something. And so we're kind of going through Vegas versus Phoenix because we were booked to fly to Phoenix. We were booked to go to Phoenix the following day. And I'm like, so guys, what's the story?

What are our thoughts?

And Vegas scored number 1 and Phoenix is always number 2 in terms of all that. And then we're like—

by the way, as I was listening to Rob finish that story on audio, I realized that Juan Martinez the vice president of manufacturing, shared a story about how they once looked at Montreal when they were there, and they realized that when they looked at their Montreal manufacturing, they look at the building that they had, and they thought, how are we ever going to outgrow this? And he said, in no time at all, they outgrew that. And he looks at the Las Vegas warehouse, and he thought the same thing.

Then I remember the first time that we walk into our Montreal building, and it was the same sensation that you walk in the corner and then you see the, the whole building, and you go, wow, this is Massive, right? And then 2 years later, we were full. Like, really, we are scrambling to put inventory, to add machinery right now. So this is the same perspective that it gives me when we started in that building. You see this space, and it seems that it's huge, but in reality, I know that in a year, this is gonna be booming with stuff. It's gonna be inventory, it's gonna be staff, it's gonna be equipment. And we are really investing in the best technology that we can.

So I think my lesson from Rob and from Juan is that be okay with growing. We all talk about how much we want to grow, um, and, and how much we want to grow our business, but growing is uncomfortable. It's actually painful. Remember when you're a kid?

It's actually a—

can be sometimes a painful process. But Juan looks at this new $5 million facility in Las Vegas and goes, we're going to outgrow this too.

So Bobby, I, I think you're absolutely right about that. And I think about my journey as a distributor, because we said at the outset that this is a story that applies to both distributors and suppliers, right? I remember starting the better part of 20 years ago, and I started out of my parents' house. I was in my early 20s, and after about a year or two, as, as Right Sleeve gathered traction, it became clear that we needed to have a real office. And I remember just like it was a week ago, sitting in a— I think it was 1,000 square feet, pretty small office at the time. And I remember sitting in this empty office, and I just signed a lease, and I was literally about to throw up as I was sitting there going, how am I going to be able to afford this? I had no employees, employees. I had no real material overhead up until that point because I was running out of a house. And, and I'd taken this big jump. And what was amazing, it was within, what, about 6 to 9 months that we had to take over the office next door. And then another year, the same thing. And then we then moved up to the, to the top floor of the building that we're in, and then ultimately took over almost the entire floor. And, and, and I think the lesson is that if you've got a great idea and you've got business with product market fit and making these investments that are going to make you kind of want to throw up a little bit.

Yeah, right.

It usually works out, and, and it's that entrepreneurial sort of leap of faith. And, and this isn't just a story about my Wrights Leap background, but it's the story that we see across the board with distributors and suppliers in this industry that have got that great product market fit, and they take that leap, and that's what makes this industry so great. And I wouldn't be surprised if we, if we go back to this podcast and say 2, 3 years and the people at Spectre have already outgrown their Las Vegas warehouse. That's my prediction. Even though right now I think Rob would say that he feels almost nauseous when looking at this empty warehouse and going, how can I fill this?

So, Mark, I'll also add this, that, you know, as a distributor, we don't have— we don't have— most of us don't have manufacturing and a footprint like this, and we don't have to consider warehousing. I mean, even though more and more distributors are because of kitting and fulfillment and things like that. But where we tend to struggle struggle with the most, I think, is talent and, and investing in more and better talent. I mean, that talent war is real, and hiring the best talent is the reality of how to run an exceptional business today. And it's also probably the equivalent of making those land and real estate and building investments in terms of just that— you talked about that entrepreneurial moment where you're like, oh my gosh, I hope this pays off because we're going to make these investments. Because I don't know about you, but I can tell you multiple times hiring a sales force or going through yet again another iteration of redeveloping our sales structure from commissions to personalities that we had, it was always that moment where you're sort of standing on the precipice going, all right, we got to be— we have to be okay with the pain of growing. Yes.

And I think it's a constant reminder as, as we as owners in this industry consider these investments. And sure, there are stories where they don't work out. And, and I'm not saying it's all, it's all perfect. Those represent, I think, great learning opportunities. But I think those businesses that, as I said before, have got that brand and that product market fit. Yeah. And that's working for them already, that making some of these aggressive investments in growth often pay off. We don't, we don't see a lot of examples in this industry where distributors or suppliers who make reasonable investments in their growth that they don't pay off.

The third lesson I learned from our visit with Spectre and Co is probably the most important lesson because I learned it also from multiple voices when we went through SKUCon, and that is focusing on strategic accounts for growth. Because I can recall a time where we were hiring salespeople and we just had this sort of blank slate, right? This open field. Hey, let's hire salespeople because they'll bring in the accounts. But we didn't really have a plan for growing those accounts. So as we make investments in our team, I— if you don't have a strategic plan for growth, then it's really a moot point. You're not just going to suddenly land sales because you have more labor. Am I making any sense? Because to me, the biggest lesson I learned listening to the Spectra story is tying together what Sam Cates talked about with focusing on one-to-one account development.

Sam, Spectra takes a fairly intimate approach with their sales philosophy, a one-to-one connection between your and accounts. Why you've chosen to kind of buck the trend around geography, which has been the more traditional way of kind of organizing sales teams. So talk about that. When I was being trained by Rob, who's the CEO, it was like my third day on the job and I didn't know anything and thought I knew things that I didn't actually know. And he said, we're looking at the sales team, and he said, I'm sorry to swear, but he said said, "Fuck geography." And I was like, "What? What does that mean?" And he's like, "I don't care. I don't want you to build a team like that. You know, I don't want that." And I— he didn't really expand, so I had to figure out what does "fuck geography" mean. So what "fuck geography" means to me now is I have worked for, you know, supplier companies in the past where the leadership, the ownership was 4 appointments a day, 4 days a week, you know, log it in the CRM, blah blah blah. And what I would ride along on those trips and see was that you had a great relationship over here, but because you had to stay busy, you had to see 4 or 5 other people kind of around. And that's an incredible waste of every kind of resource imaginable. And so I helped to build out a team that they may do most of their work virtually, they may get on get on a plane to do an all-day meeting with a customer, just one, because that customer is worth it, and that relationship is worth it, and then spend the evening and go to dinner, or take their team out, or, you know, have a bartender come in and make it fun. I mean, this is such a fun business, and it's not supposed to be so transactional. And so that fuck geography thing to me meant that I could kind of blow the barn doors open a bit, instead of building this kind of old-school, of territory, territory, that's my territory rep, that's my territory rep. We don't have that. We have strategic account managers, and Ashley is sitting there and she's one, and she's got accounts in 6 states. Now there's a little method to the madness. I mean, obviously from a resource and cost, you can't make it, so there's a little bit of thought to that, but it doesn't mean that because she lives in Toronto, she should only have Toronto-based accounts. It may mean that she has 1 or 2 great Toronto-based based accounts, but that's it. If that doesn't fit with her personality, if those people aren't the right kind of Spectre-type relationship, I'd rather put her in front of the customers who will appreciate her, understand her, and she will appreciate, understand them. So that's how I interpreted fuck geography, and it's different, but I think it's worked well and it's helped us build stronger relationships.

I found that to be a very impactful part of the story, this focus on strategic accounts. And the other thing that Sam and Rob were making clear is that they are not restricted to geography. So that if there's a particular account in Seattle where there's a great fit between one particular Spectre account manager and that distributor in Seattle, but there may be another distributor across the street who's got a better cultural fit with another account rep at Spectre, then they're not going to carve it out by geography and say, hey, it's so-and-so that is covering all these particular accounts. And that's been really exciting for us on the technology side. And you think about how the Commonsku experience connects those suppliers and distributors regardless of geography, that you could be an account person in Montreal head office servicing an amazing distributor in Arkansas, California, Vancouver, Toronto, and Halifax because of that data sharing and the ability to connect digitally. And so it's been really exciting for us to see that part of our model really proliferate and, and And it feels to me like a very modern approach that these suppliers are taking that are focusing on investing in these strategic accounts. Those are the ones that represent the greatest opportunity to grow. Right.

And I think the key there is what I'm learning from certain suppliers, particularly boutique suppliers, let's say. Rob used that phrase, so I think it's safe to say that phrase. And when I say boutique, they may be huge, but they sort of serve a boutique market. Isn't that strategic accounts versus national accounts? I think at one time in the industry, national accounts was where it was at. But what we're learning is that even like, let's look at Commonsku, you know, we're talking $1.4 billion in revenue and there are so many strategic accounts within that amount of revenue, right? And so you could take national accounts, to me gives us like this blanket approach, um, whereas strategic accounts, this gets back to my distributor hat on in terms of developing a sales team, is saying, okay, here's the types of accounts that really can grow our business because they get us, they understand us, They vibe with us. For example, here's Rob to talk about how he thinks through that particular strategic account process.

Our product may not appeal to a lot of people, right? Yeah. Or they may not get it, or they may not care about what we do from a merchandising and product perspective. So we've always been very focused on what I call quality meetings. So I know a lot of suppliers are more interested in how many visits a supplier sales rep will call on. You need to visit 20 distributors a week, whatever, 20 companies a week, whatever. We've always been focused on— you can spend a whole day with one guy. Yeah, if you have the right meeting and the right time. And so we've been very focused always on spending quality time with the right company. Yeah, but now we feel we need to focus more time on the one-on-one relationship. Not that we don't have them, but, you know, with COVID and remote working and consolidation, you know, our relationship is really with the distributor sales rep. Because if you look at the larger distributors, there may be a handful of distributor sales reps, we call them DSRs, that really enjoy working with us, that want to work with us, that can work with us, that should work with us. So we need to educate those 250 guys. I don't need to sell all 20,000 distributors.

Yeah.

But if you give me 250 guys that are selling my products every day, that are calling me every day, emailing me every day.

Yeah.

That's—

that's—

Mark, let me ask you this. When I say strategic accounts versus national accounts, what do you think?

I think, as you say, that a national account typically is a basket of accounts that are across the country, and they'll typically be 1 or 2 people at the supplier that will focus on them. And it's really difficult to provide the same kind of service, the same quality of service, because you have so many different parts of that national account. Some may be bigger, some may be smaller. And I think from a supplier perspective, that's got to be really challenging. I think focusing more on a strategic account basis because I think personally it's a more efficient way of being able to assign supplier resources to focus in on those right customers who can really drive that particular volume. Some might call it an 80/20 rule, right, in terms of being able to focus a ton of resources on these great strategic accounts. And some may be multimillion-dollar distributors and others may be smaller distributors like a 1 or a 2-person distributor that has the capacity to grow significantly. And so I feel like that's, that's maybe where the difference is between those particular approaches.

When we were at SKUCon, we had a session we called the tipping point. And what it was was 3 distributors, 3 different stories. And we wanted to know what was the tipping point in their business that led to their growth? What was the key decision or a couple decisions that led to their growth? And I'll never forget Jeff Becker with Kodas Design, because bear in mind that this is like a principle that repeats itself through most and many successful businesses. So it's worth always talking about in terms of that. Jeff Becker fired like a certain number of his clients so that they could create a path to growth. Is that $55 million in part you got there through attrition? You fired 1,200 of your 1,600 customers. Great job.

Yeah, I went back and actually looked at the numbers after talking to you, and I think we fired like about 900 $250,000. It was about $6 million. I see applause. Yeah, $6 million, about $6 million in customers. Probably maybe like 60% of our customers basically moved on from the start of last year. Why?

Was it purely a revenue thing per client, or did you decide a type of client? What was it?

Yeah, I mean, we looked at the size. We looked at the size, we looked at people, customers who probably wouldn't spend, we didn't think would spend $25,000 in a year. I know that I always reference Jim Collins from Good to Great on the hedgehog model, and I've always talked about this hedgehog model, but for the last 20 years, I didn't know what my hedgehog model was. I, like a lot of us, I just sort of sold to everyone, but we've doubled down and refocused and I'm like this now. And so we said these don't fit, and so we axed them all so I know I can grow by moving on from and opening the bandwidth up for my team to really focus on the customers we want.

And so my point to tie it together is that it's just not about— this is both a supplier and a distributor story in terms of focusing on the right kind of accounts, the right kind of growth, and the right kinds of partners that will help us achieve that growth. Mark, one example might be— Right Sleeve is the type of distributor that would, would have been in Spector's wheelhouse, and you grew along with Spector. Don't you think that's probably a good picture of what we're talking about in terms of the right account and growing with the right type of partnership?

I mean, I've, I've had a, a 20-year relationship with Spector. When I think about my former distributor background. And you're, you're absolutely right that we, we grew considerably with them because of this great strategic account focus. Right Sleeve wasn't the biggest distributor in the industry, but as we grew, we grew alongside Spectre and there was a, a great focus on our needs, a great focus on our clients. It was a great relationship through the Commscue platform. And that was exciting for us. And of course, now no longer being in the distributor business, it's really exciting to see where Spectre has, has since moved in terms of where they're now going and, and doubling down on this continued growth and finding those additional right sleeve type clients, the additional right sleeve type strategic accounts. And it's, it's a, it's an exciting strategy as they, as they invest in the US.

Yeah, the last lesson I learned from Spectre and Co. on our visit really came from Juan Martinez, and it talked about hiring the right people who have the capacity to learn and who are hungry to grow. And it's a truism that bears repeating, but, um, I was really impressed with Juan Martinez. He's an immigrant from Mexico City with an industrial design degree. He landed in Montreal, and for 23 years he's led a lot of the manufacturing innovation at Spectre. And I was really impressed with Juan because of the way he thought about how we're going to grow. And I asked him what was the number one challenge in terms of their new development there in Las Vegas, and specifically around where they're at right now, which is hiring people. He had this to say about looking for the right kind of people.

Hardest part, again, is, you know, I say every time that I I'd rather install 30 machines than change the mindset of 30 people. Say that again.

You would rather—

Install 30 machines in a layout like this, do all the mechanical, electrical, pneumatic, because that is on total control, than having 30 people that don't have the right mindset to work in our teams. So it's very important that we select the right people on this project.. And I think that is probably, I wouldn't say the hardest part, but it's one of the focal points of my involvement and development on this facility. I want to make sure that we have the best people that appreciate all the effort that goes around it and that can thrive, like really one day can say, like me, you know, 23 years ago we started this project in Vegas and I'm still here. I mean, you have no You have no idea how much pride that represents, especially to me. I was a new immigrant 35 years ago, 30 years ago in Montreal, right? From where? From Mexico City. So, and started in this company as a pen printer. So, I don't know, I think that that says something, not only about Spectre, but about the opportunity that this building can represent for another group of people like these kids that we have over here. If you work on a place for 10 years and you have your processes over those 10 years, it's very hard for you to change, yeah, to change the way you do things. And yet people ask, okay, you like innovation? Everybody says yes because it's very positive, right? Nobody says, oh, I don't like innovation. But in reality, nobody likes innovation. Because if I walk right now and I take your recorder and I take it and they give you another one that you don't know how to operate it, you're gonna go, you know why? I like this one. I don't care if there's a new one or a better one because I'm used to this one. So that happens with every piece of equipment that we have over here and in Montreal. So we need to manage the mentality of the people to make sure that all our processes, all our equipment, ultimately all the services that we offer to our clients are in tip-top shape.

As we close this episode, I'm real curious what other thoughts you had, what we learned from hanging out with Rob and Juan and the team at Spectra and Co.

So I think there were two things that jumped to mind. One is I'm really excited as a part of this industry to see continued onshore investments by the industry, and particularly the suppliers. And so the the ability to, uh, and so what Spectra is doing in the US market is a great example of that— investing in warehouse space, investing in domestic labor, uh, to be able to increase their footprint and increase their business. I think that's great for, uh, both of our countries, the US and Canada, and North America. And I also think it's great for the industry. So I applaud suppliers that make these continued onshore investments. I think the, the second observation that was, it was kind of cool for me, and I'm curious on your view of this, is that I think this is the very first factory visit— and believe me, we've done many of them in our time— yeah, where the factory was just being built. So we, we basically walked into a blank canvas. Uh, there was no racking, there was no machinery. There was maybe taped out and, and, and some, uh, and some certainly some, uh, advanced plans, but we didn't see a factory before our eyes. We just saw a blank canvas, a blank warehouse. And I, I found that really exciting to, to hear Rob and Juan and some of the other Spectre colleagues paint a picture as to what this was going to look like. Because in my mind, I'm like, I can see it, but I can't quite see it like you can— like, like you gentlemen can, right? And, and that to me was exciting because because I'm curious to listen back to this in a year or two, three's time, and to either— and hopefully this has been a stunning success for the Spectra team. Hopefully they've outgrown it. They were actually talking about some nearby warehouse space and maybe a competition with Amazon for some additional space. I thought that was fascinating. But all too often we go in and we visit factories that are humming and are operational, and that's really exciting as well. But I found this particularly unique. That we were walking into a space and about dreams that were about to come true or hopefully come true. I'm sure they will. And to me, I was particularly pleased to have that experience. So really, really thank Rob and Juan and the whole Spectra team for giving us this sneak peek about their unfolding vision. Yep.

Spectra Co. will be fully operational March 1st. And what a great story. And I want to echo Mark's thoughts. Juan and Rob and the team, thank you for inviting us into your business home. Home and watching the expansion in real time. I agree with Mark, it was really fun. It was like looking at a blank canvas and hearing how the gears were spinning in terms of how they're literally going to build this out, hire the right team. So it was a fun story focused on growth. And again, just another proud moment for our industry when you can see the kind of innovation that can happen around the kind of creativity. We didn't even get to Rob's amazing product innovation because we were just so mesmerized by the, the real-time story that was happening. But it's another great example of some incredible entrepreneurs in the industry. So hats off to you, Rob and Juan and the team, and thanks for having us out.

Thanks so much for tuning in to this episode of SKUcast. Be sure to keep up with our latest content by subscribing to SKUcast on iTunes or to to our blog at community.commskew.com. Until next time, friends, thanks so much for listening.