Adam Honig: Hello and welcome to Make it. Move it. Sell it. On this podcast, I talk with company leaders about how they’re modernizing the business of making, moving and selling products. And of course, having fun along the way. I’m your host, Adam Honig, the CEO of Spiro.ai. We make amazing software for companies in the supply chain, but we are not talking about that today. Instead, we’re gonna be talking with Adam Faber, who’s the CFO of SES Foam, probably the finest maker of spray insulation that you can find in all of the United States. And Adam’s gonna be talking with me about a lot of different things, cash collections, having fun, making money, the kind of things that every company should be focused on. So Adam, welcome to the podcast.
Adam Faber: Thank you Adam.
Adam Honig: It’s always nice to talk with another person named Adam. It can be very confusing for other people, but not for me. Tell us a little bit about SES Foam. Are you guys really the finest spray foam manufacturer in the United States, or is that just something I tell people?
Adam Faber: No, you should continue to tell everyone that, make it a household name. SES Foam manufactures spray, polyurethane foam, so it’s the new age insulation that’s going into your home or commercial building product. So if you think of a liquid that comes out of a can and turns into a solid, so you get a pretty high return on what comes outta that can, that’s what you’re looking at in terms of spray polyurethane foam. It’s the newest stuff that you wanna make sure that you’re putting into your home.
Adam Honig: I live here in New England and we have a lot of need for that, but I’m sure all kinds of different houses, businesses, and everybody needs to be insulated these days.
Adam Faber: Oh, absolutely. And up in your area, especially with the way building codes are going, but becomes much more important as you start talking about ways to insulate your home, really start to manage the airflow in your home, and ultimately as a homeowner, really start to save some money as well. So you start talking about lowering your electric bill, having a smaller AC unit and managing, like I said, the airflow in and out of that home.
Adam Honig: Right, so it’s a great way to save money. Now speaking about money Adam, I know one of the things we wanna talk about today is cash, and I looked up the expression “Cash is King.” And I always thought that that was an expression that was in the public domain for hundreds of years. But did you realize that it was actually invented by the CEO of Volvo the car maker?
Adam Faber: Had no idea of that. I also thought it was something that came along with business from the infancy of business.
Adam Honig: Right, it was like something in Shakespeare’s time or something like that. But no, I looked it up, according to Wikipedia, Pehr Gyllenhammar, CEO of the Volvo car company invented that saying; it’s amazing. Who knew that somebody needed to come up with that.
Adam Faber: It is very interesting, but it is certainly true today. Even when he made that up versus where we are today.
Adam Honig: Yeah, so talk a little bit about cash. I know when we met before, cash has been a big focus of yours and you guys have gone through a lot of work to improve cash collections and cash flow at the business. Tell us a little bit about that.
Adam Faber: Yeah, so the way that I describe SES Foam, and things have evolved a little bit over time, but SES Foam exists in between a rock and a hard place. If I can use that expression. Some of our customers are some of the smallest customers that you can have in terms of contractors that exist out there. And the vendors that we buy from are the world’s largest chemical companies. And when I say smallest customers, that doesn’t mean anything negative or derogatory towards those business owners, but it becomes a very critical piece of their life. That is their business. And so when you go in and you start talking to your customers about cash and what is going on, you have to manage that relationship very acutely, if you will. Make sure that you’ve got your hands on the situation and you really know what’s going on in all aspects of the business.
Adam Honig: And when you say what’s going on, you mean like where they are in terms of their payments to you and their inventory level and all of that. What do you mean by that?
Adam Faber: All of the above. You know, I had a conversation with a customer on Friday of last week, where she sent me an email and said “Hey, my bank account got hacked, and this individual owes me a fairly large amount of money.” And her concern was we had not cashed your check. And so I’m having this conversation with her as we go along, and I said “Look, I understand what is about to happen to you, you’re not about to have any access to the money that you have.” And she stopped for a second and goes, “What do you mean?” I said “Well, they’re gonna freeze your account, this is what’s gonna happen. If somebody has access to your money, they’re gonna make sure that they can do everything they can.” So the whole point of the conversation with this customer, I said, “Look, you are most likely not gonna be able to pay your bill that is due next week or the week after for some period of time. So let’s talk through ‘what does that mean?’ And that relationship really becomes key throughout the entire process, making sure that I’m being upfront with them and I understand their position.
So from an inventory perspective, Adam, for me, it is how much inventory do you really need? If you start talking to someone who’s relatively new in the space, do they have an inventory management system? Do they know where they’re gonna put our product, or where they’re gonna spray our product? One of the first questions I ask from a credit management perspective is how many rigs do you own? I’m not trying to get into your business, I don’t really have a problem if you wanna buy more, so long as you pay for it. But if I know you don’t have the assets to be able to spray my product, let’s not put ourselves going down a difficult conversation. I can work through pricing and other things with you, but I need you to be upfront and honest with me. And then I’ll be upfront and honest with you in terms of credit and how this relationship is gonna go.
Adam Honig: That’s really interesting. So there are times when people might wanna buy more than what they need. And you’re actually in the position of having to kind of slow them down a little bit to help them, to make sure they’re not getting in trouble with their own finances.
Adam Faber: Oh, absolutely. I mean, when I came into this business, a conversation with someone that was “I haven’t sprayed your product yet, so I don’t have to pay for it” was commonplace. This occurred frequently. And there were times when I would go directly to the customer myself to have this follow-up conversation. And say look, this is not the way that this can work, what is reality for you? Because there is a shelf life on the product as well, it’s relatively long, but we’re not concerned about that from this perspective. But I am concerned from the fact that if you think that this is some sort of consignment business, that’s just not real life. And so when I started, I used to get upset by this and then you start realizing you cannot get upset, you can only educate and try and help these folks. And really just try and become a partner with them to say hey look, let me help you so we can work together for the long term and not make this once or twice a year type sale.
Adam Honig: The way that I envisioned it, many of your customers are like skilled tradesmen and groups of tradesmen, and they’re really good at what they do, but maybe managing their business isn’t their top skill.
Adam Faber: So that’s certainly the way you look at it. I mean not in all instances, we do have varying levels of customers in terms of their maturity levels and what they’re running. It wouldn’t be abnormal for you to pick up some sort of magazine and say you could go buy a spray foam rig for a hundred thousand dollars or something of that nature or that dollar value and turn around and think that you’re gonna make 500,000, but spraying foam is not easy. Let’s face it, as we were talking earlier, it’s 90 degrees plus in Houston right now with 85% humidity, feels about 110. You know what it feels like in an attic right now? I mean it’s tough work and these guys do tough work, so then on the backside of that, if you go spraying product all day, do you have the time to stop and think about invoicing your customers and getting cash in the door from yourselves? And don’t even mention if you start going out and trying to get governmental work and you start talking about 90-day terms. That’s again where I look back at our customers and say tell me about the businesses that you’re spraying or the contracts that you have. Are they 90-day contracts because you’re not gonna be able to pay me in 30 days, you’re gonna need to work out a different arrangement on that individual contract. Again, I just keep going back to the word partnership for us, that’s what we really try and focus on and make sure that we understand what’s going on in our customers’ business.
Adam Honig: Yeah, that makes perfect sense. So really to help them, and help manage the way that they consume the product to make sure that the cash coming in matches up with what your expenses are as well. Does that ever create tensions with the sales team?
Adam Faber: Well there’s a natural tension that should exist between a good salesperson and the company that they work for. Now there should also be a little bit of tension, potentially that would exist between a customer and a salesperson in the event that the customer isn’t treating the vendor in this case or me in this case appropriately. But I expect, and I guess our salespeople could listen to this and hear it, I don’t want them to know this, but I would expect in all instances that our sales people are prepared to have an uncomfortable conversation with me. I don’t call it an argument, I don’t call it a disagreement, just say it’s uncomfortable. Well I’m gonna call you Adam and ask why your customer hasn’t paid the bill yet, and you’ll give me an answer as to what’s going on. That’s not always fun when you’re used to taking somebody out for a burger and beers, and now all of a sudden you gotta talk about, especially in today’s market where things are so much more expensive, hey, you owe me the large portion of a house payment right now, and this is not easy.
Adam Honig: Well, I guess building a good relationship with the sales team, as well as the customers must be pretty important in your role.
Adam Faber: Yeah, it’s huge. You can’t just look at it from a simple numbers game, especially anymore. You really have to be able to have that conversation and hopefully you can train the sales force as well in that relationship, saying look, I’m not out here just to beat everybody up and to beat your customers up and try and get the money 10 days ahead of time. Let’s make sure that we understand everything that’s going on here.
Adam Honig: Yep, it makes perfect sense. And how are things been on the supply side, has it been challenging to get materials and inputs to make the foam?
Adam Faber: It’s been very challenging. 2021 was not a simple year by any stretch of the imagination, every day it was something new it felt like. I try and give stories that exist or that occurred during 2021, and I can almost hardly remember the dates. I can’t remember if it was 2020, or 2021, are we in 2022 now, how far along are we? And your head just spins as you look at it, but 2021 was tough. Whether it was chemical shortages coming out of China, whether it was the fact that the cost to get a container out of China was exponentially more expensive. With the freeze that occurred down in Texas, that was difficult.
Adam Honig: When you say freeze, you mean like the literal freeze, like everything froze over for a while?
Adam Faber: Yeah, in February, down here on the Gulf coast, we had a massive freeze for two or three days, and that’s just not something we’re used to. Do you talk to folks up in your neck of the woods, like what do you mean it was 20 degrees for two days? You can’t survive. No, we literally could not survive. I was living in my camper in my driveway because I had a solar panel on it so I could get some heat and it was wild.
Adam Honig: Yeah, I know a lot of people in Texas who don’t have winter coats, like that’s just not a thing.
Adam Faber: I still have one from when I came from Kansas 10 years ago, and it’s way out of style, but it’s still warm.
Adam Honig: Yeah, so the customer side has been challenging, the supply side has been challenging, it sounds like it’s been a pretty interesting time that you’ve been going through.
Adam Faber: Interesting to say the least, but I’m happy to say at the same time we’ve seen as much growth as we’ve ever seen, and we were able to capitalize on some of the things that went on in the market, which has really helped us a lot. And we managed the supply chain issues that were out there and we managed the customer situation that existed. And we really were able to flourish quite a bit. You look at it, we treat our customers and vendors very fairly as that’s always the goal. During this time period, I could have looked every single one of my customers in the face, take it with a grain of salt a little bit, but could have looked at everybody and said you need to prepay for your product. And that’s because the product was so tight everywhere. You could have done that, you could have gone out and you could have charged 25, 30% more than you would’ve normally gotten and you a hundred percent could have sold your product. But that is not what you should do if you plan on keeping someone after things return to some semblance of normalcy.
Adam Honig: Right, so it’s really about having a long-term partnership with the customers, not about just taking advantage of the moment.
Adam Faber: For us, it’s all about retention. It’s all about finding key customers that we can land and expand with. We want people that are gonna be able to be here with us for the long haul. We want someone who comes in and says this is what I wanna see outta my business. This is the volume I wanna see outta my business. This is how I see growth coming on. We’ve gone so far as taking one customer who is struggling, turning them onto another customer who is succeeding. And that turned around to be sort of a marriage later on where one buys the other and that’s a growth strategy for people, we’ve seen that happen. We try to get involved and engaged as much as possible.
Adam Honig: Yeah, that makes a lot of sense. One of the things I noticed on your website is there’s a big emphasis on the idea of having fun with customers and showing them how to make more money. Is that a common thing in the insulation business or is that something unique to SES?
Adam Faber: I think it’s fairly unique to SES. We really look at it from, as I’ve said, a couple different times from a partnership perspective. If I can help you, Adam, make 1, 2, or 5% more gross profit, what does that do for you personally? Everybody’s gonna come to me and they’re gonna ask for a penny here or a penny there per pound off on their price. I mean simple things like finding extra products sitting at the bottom of a drum at the end of the day, or talking to someone about what you can do to get more yield. So our product is based on yield. We have one of the highest yielding open-sell products on the market. And so if I can show you how to use that better and get as much possible yield that you can get out of it, that’s huge. We hear all the time, “Oh my folks won’t spray this product.” No, let me help you understand what this means to you in terms of dollars. And we turn around and we make that real and what you’re gonna take home, and what that means to you individually.
Adam Honig: So important to make sure that people see the value of what you’re delivering and not just the concept of it. Because I think often what I’ve experienced with companies is that they think people will just understand the value if you explain to them the idea. You have to kind of take them to the point of saying no, this is the value that you can get from this. I think that’s super important.
Adam Faber: Absolutely. You can’t talk too much about it with them, and you cannot make it as important as it should be to someone. And you see when it clicks with individuals, you see when it clicks with certain people. There are folks that we’ve had as customers for a really long time, and when you get a sit down and you get to chat with them and ask what happened or why they’re still here and you see that there is really a relationship there, it is pretty special. It’s pretty neat to see. And it doesn’t exist in every instance and you definitely get folks who bounce back and forth. And we saw it a lot during 2021 where people would call us up and say hey, I wanna buy your product. Well they wanted to buy our product because they couldn’t get it anywhere else. So we had to really hone in and focus on the people that actually wanted the product and wanted to see that value out of it as you say, and not just looking for product. Who’s gonna be here with me in 2022 and beyond, not just here for a couple weeks.
Adam Honig: Obviously we’re going through these unprecedented economic times, but I feel like the companies are going to form an opinion about what it’s like to work with your business during this moment. And that impression that you make will really just carry forward for a decade following.
Adam Faber: Oh, I really hope that’s the case. In a world of force majeure, right, what’s your goal, you have to cover a contract. And from our perspective, we were in a similar situation. We could only produce so much product, and our goal was we were gonna sell to every single one of our customers. We’re not only gonna sell to the biggest of the big or only the small. We wanted to make sure that we hit everyone. You hope that those decisions and that treatment is appreciated for the long term because that’s not what existed in the market, and that’s not what existed in a lot of places. It’s really interesting when you see why people are willing to switch, and I believe that it’s gonna be here for the long term. I really do think it’s gonna pay massive dividends for us into the future.
Adam Honig: What about new customers Adam? We’ve been having conversations with folks who basically said listen, we can’t even satisfy all of our existing customers. We’re just not able to bring on new customers. Has that been the case with you guys?
Adam Faber: We said no new customers early in 2021. We made a pretty clear statement to our sales force that we were not gonna bring anybody else on so long as we were in the tightness that we were at that point in time. We did bring on two or three key accounts during 2021 that were ongoing discussions. They were very detailed discussions. There were times when I went out and visited those customers directly. There were times where the president of the company went out and visited those customers directly. And we were trying to make sure that it wasn’t just a game of them trying to survive themselves because we told them you are a five-rig company. You’re gonna buy 5 to 10 trucks of foam a quarter from us right now, at least. Maybe more than that, and you definitely would buy more than that if you could get it, but we can’t supply all that. We’re telling you right now that we’re not gonna be able to do that. So if it’s gonna upset you, if we’re not gonna be able to make this work, then let’s just not make it work, let’s go our separate ways. And we were very upfront and honest with the customers when we were doing that. It was tough on our sales force, but at the same time, it was the right decision for our company and for the folks that we serve for the long term.
Adam Honig: Well it sounds like you took a very strategic approach to it. And trying to think through the issues and understand how you could best serve these customers and whether they were right for the decade that we’d been just talking about coming up.
Adam Faber: Yeah we like to think so. We certainly like to think that was the appropriate decision. Like I said, we probably left a few dollars on the table because we could have been charging a little bit more and we chose not to do that. We definitely left dollars on the table because we were willing to source supplies from anywhere in the world at a more expensive rate. But we were willing to do that to make sure that we were able to supply as consistently as possible. And that consistency is what really creates the key to our longevity moving forward.
Adam Honig: How do you feel like you’re doing, dealing with rising costs in this new age of inflation that we’re having?
Adam Faber: Well fortunately for us, and it’s not good for the contractor and ultimately the homeowner unfortunately, but fortunately for us, we’ve been able to pass a lot of our costs along. We’re part of the inflationary problems that exist everywhere right now. If you think back to what went on in building products in early 2021, the rise of cost was just astronomical if you will, it was crazy. And it’s even like the gasoline you hear of today, people are so excited that gas fell below $4 a gallon. Well hold on, what was it, 12 months ago? It was much less than $4 a gallon. Why is that the new, why is that the new? But that’s what happened with building products, they never really fell all the way back down. You just don’t hear about it as much because the rise has slowed. From our perspective, we’ve been able to pass along much of the cost increases that we’ve seen. We haven’t been a hundred percent successful in that, but we have been able to do that now. From our perspective, we are happy to, at least at this point, be able to talk about most of our customers, and have been able to see a similar pass-through of cost. Again, the one that’s hurting is the individual at the end of the day who’s buying the home. But from our perspective, it is a better product, we can pass through some savings to the homeowner in the long run. And if you’re able to pass that cost through in terms of your mortgage, it’s a little bit less. I’m not gonna sit here and say that it’s great for everybody, you know?
Adam Honig: With the price of oil and natural gas going up, I mean more insulation definitely helps offset even more of that going up too. I mean it’s all related.
Adam Faber: Adam, do you wanna come sell for the spray polyurethane foam insulation association? We need that.
Adam Honig: Maybe.
Adam Faber: That’s exactly the truth, that’s what we tell everybody. It’s a hundred percent the better option in a rising cost environment. Like I said, you get a smaller AC unit, you have cheaper electric bills. So that in term means you’re gonna be paying for less gas when you’re heating, all that kind of stuff. It’s a really cool product. It is much more efficient for your home, and we would recommend putting it anywhere. I have it in my attic, I have a retrofitted home with it and in the heat of the day in Houston, Texas, I can be in my attic. I wouldn’t wanna work up there necessarily. It’s still probably high eighties, but from mid hundreds, 140 degrees plus to high eighties, that’s a pretty noticeable difference obviously.
Adam Honig: Yeah, for sure. Well Adam, tell me how is SES using technology in this strategy of partnering, how’s that working for you guys?
Adam Faber: From my perspective, it’s all about the data, right? What data can you be collecting and analyzing as fast as possible to make sure that you’re keeping up with the trends in the business? SES is a small company still today and I’ve worked for some larger organizations and seen some really cool things that you can do with it. And ultimately, technology as a form of communication and making sure that you’re capitalizing on that is what I’ve seen work best in what we’re really trying to do here as well. And as we continue to grow, that’s the way we’ll continue to use technology. And I’m not here to give Spiro the pat on the back or be your advertiser, but that’s the reason why we chose Spiro was the flexibility of the tool and being able to use it for a lot of different things for the business. And as we start to look at the resources that we’re gonna bring in and implement into the business, that’s what we’re focused on, is how can we achieve multiple goals at one time and not have to add a significant amount of manpower to do that?
Adam Honig: Yep, makes perfect sense to me. Well Adam, I really appreciate you joining us on the podcast today, it’s been a great conversation. For me, I think just hearing you talk about partnering with customers and as the CFO, maybe CFOs kind of get the bad rap sometimes of not being very customer-focused. But it’s super refreshing to hear just how engaged you are with them and really helping their businesses, so really appreciate that.
Adam Faber: Yeah, thanks Adam, I appreciate the opportunity to come on.
Adam Honig: And as a reminder for our listeners, you can find every episode of the Make it. Move it. Sell it podcast at spiro.ai/podcast, be sure to subscribe. And hey listen, if you thought Adam and I were having a good conversation here today, maybe give us a good review. I don’t know Adam, do you think they should do that?
Adam Faber: I hope they do.
Adam Honig: I hope they do. And in any case, we look forward to talking with you on the next podcast. Thank you so much.
Spiro is the first proactive relationship management platform. Natively built on artificial intelligence, Spiro provides a single solution encompassing traditional CRM, sales enablement and telephony. Spiro’s AI engine eliminates the need for data entry and proactively guides salespeople to the right actions at the right time. Customers report collecting 16 times more data, reaching 30% more prospects and closing 20% more deals after using Spiro. For more information, visit https://www.spiro.ai.