Dave Cain: Welcome to unsuitable on Rea Radio, the award-winning financial services and business advisory podcast that challenges your old-school business practices, and their traditional business-suit culture. Our guests are industry professionals, experts who will challenge you to think beyond the suit and tie, while offering you meaningful modern solutions to help enhance your company’s growth. From Rea Studios in Dublin, Ohio, I’m your host, Dave Cain.
Ohio is home to two of the top four largest settlements of Plain communities, or Amish and Mennonite populations. In fact, if you’ve ever traveled through Holmes County, and Geauga County, you’ve likely noticed the Rolling Hills, and the unique lifestyle, but there is also a work ethic in craftsmanship that is second to none. In fact, visitors from all over the United States come to visit these communities every year in search of high quality products, homemade goodies. Make no mistake, these business owners know that they’re doing. They do it well, and in many cases, they’ve been honing their crafts for generations. On today’s episode of unsuitable, we will be talking to Kyle Stemple, President of Rea’s East Central Ohio region to talk about how many businesses in the Plain community operate, and the reasons they continue to be so successful. Welcome back to unsuitable, Kyle.
Kyle Stemple: Thanks, Dave. It’s great to be here.
Dave: And today we’re going to dive into a really unique service offering that your group has started. I forget to mention that you also are the director of Rea’s manufacturing and distribution services, so that was not in your bio, but you have quite a full plate.
Kyle: Yeah, it seems in this firm we all wear a few hats. Everybody’s got to pitch in when we need to, so.
Dave: As we talked earlier this week getting ready for today’s podcast, we talked about all your professional credentials, but we also talked about your work-life balance, and I want to commend you on kind of the work-life balance that you’ve been able to generate as a professional. It seems that things you enjoy are hunting, fishing, golfing, spending time with your kids. You even shared a story that you take your kids out four wheeling just to kind of be out in the woods.
Kyle: Yeah, the kids love to go out in the Polaris and go feed the deer.
Dave: As we had that conversation, I thought this guy is not your typical CPA. This is not your grandfather’s CPA. This guy is really very different from the … you’re not a stereotype CPA.
Kyle: Dave, that’s one thing I think that makes Rea unique, is that we do not have a lot of stereotypical CPAs. We’ve got a lot of people that come from different backgrounds, from different communities, and I think that’s what makes our culture as amazing as it is here at Rea and Associates.
Dave: We talk about the manufacturing services that you oversee. How many manufacturing and distribution clients does Rea & Associates have across the firm?
Kyle: Dave, we have somewhere around 320 manufacturing clients around the firm. Those 320 clients make up about 16% of our firms total revenue, and obviously, there’s a wider range of services that we offer those manufacturing clients.
Dave: Now, as the director of the manufacturing group, you guys are charges with being a solutions finder, and finding a need in the marketplace. And certainly in our introduce when we talked about the Plain community, you guys found some solutions, found some services for the Plain community, and we want to talk about that a little bit today.
First of all, let’s start with how did you find the need for the services within the Plain community?
Kyle: Yeah, I think a lot of it is where our offices are located. With our Millersburg office, our New Philadelphia office, and our Wooster office. That triangle kind of surrounds a nice population of the Plain community, so I’d say being in the right place at the right time, and being the providers we are to add value to our clients. Not only to be their tax accountant but become that trusted advisor.
Dave: Now when you’re talking about the Plain community and the Amish or Mennonite community, and in certain groups within, what do you typically find is their education? What does their education go through? What grade?
Kyle: Dave, most of these individuals go to school up through 8th grade.
Dave: With virtually no business courses, I would assume.
Kyle: No, it’s normally your grammar, your technical stuff that they’re getting.
Dave: Reading, writing, arithmetic.
Kyle: Yep.
Dave: So where do they gain the business experience that is so rich in tradition?
Kyle: I think a couple things, Dave. Their culture and heritage from a standpoint of a lot of it is let’s look at and take care of our own, as well as they’ve got larger families that live on farms and do different things. So those young individuals get chores at a very young age, and they’re really taught in those communities to really help out family. Very tight-knit community, so they’re learning responsibility, and real-world responsibilities, at an early age.
Dave: Let’s make no mistake. We’re talking about some very, very successful businesses. Maybe generational businesses.
Kyle: Most definitely. We, at Rea & Associates, have a lot of clients in that Plain community that are easily switching to that third generation, and not having near the issues going to the third generation as what I would say our other normal businesses would.
Dave: Now, as a business owner you and I both grew up, and we used Google. We have the internet, computers, handheld devices. I wonder what it would be like to try to run a successful business without those tools?
Kyle: As you look here, and you sit here and you realize that your phone dictates what you do every day, if you take some of that out of there, I think it allows you to put more focus on the real things that matter in life. Family, community, church, those type of things, as well as … I think if there was one advantage that I think those individuals have, is the fact that they don’t have access to information at their fingertips like we do, per se. What they have to do is they have to rely on people. They have to find a trusted advisor. They have to find somebody who can give them the answers when they need it, which is different from a lot of our other business owners that have that ability to think they know how to come up with the answers but Googling. And believe it or not people, not everything you read on the internet is true. I mean, it might sound good, and it might look pretty, and it might look like it’s really written well, but it’s not always true. So I think that’s the biggest …
I always say as a business owner, you’ve got two choices. There are things that need to be done. You either do them, or you’ve got to pay somebody to do them, and the nice thing with that community is that they’re tradesmanship, and their work ethic, and their craftsmanship, and the quality that they do. That’s where they put their focus on, and they hire the difference, and that’s what I think makes them unique.
Dave: Did I read in your bio that you’re also a green belt in the Six Sigma ring?
Kyle: Yes, I am. I’m a green belt in Lean Six Sigma. I’ve been doing that work for many years, as well as a lot of that work in the Plain community.
Dave: I was going to say, have you taken that into the Plain community?
Kyle: Yeah. Back when we started getting into that work, back in 2008 and 2009, the different back then is we had to, as business owners, you had to do more with less, and it wasn’t because … it wasn’t because … it was because of the fact the profitability and the economy and that. So realistically, a lot of us thought that was going to be a short shelf life for that product. However, the difference is, Holmes County has got the lowest unemployment rate in the state of Ohio at 3.9%. So basically, everyone who wants a job has a job.
So the challenge today is you still have to do more with less, so we have to become more efficient. We have to become more effective. We have to look at robotics. We have to look at machinery, because at the end of the day, if you grow, you’re not going to be able to find the number of people it’s going to take to hire using your old school methods, and that’s the nicest thing that community is really opening up to. They understand that because they can’t find people every time they grow, and they realize the only way they’re going to be able to do it is to become more efficient and effective.
Dave: You use the term trusted advisor, and the community needs to rely heavily on a trusted advisor. How have you honed your trusted advisor skills?
Kyle: Yeah, I think it’s not just me, Dave. I mean, we’ve got a lot of great trusted advisors in our firm, and what I try to explain to people, and what we’re doing in the manufacturing segment, is we are trying to educate our people in order to … everything within manufacturing to be able to talk about everything. Not just the boring accounting and taxes and that stuff, because at the end of the day, clients don’t care whether you yourself have the answer. They just want you to be able to point them in the right direction. And that’s what a trusted advisor does.
Dave: I’m looking for an honest answer here. You’re out in the tree stand. Are thinking about how to improve your trusted advisor skills? You’re a 24/7 guy. I know the answer to that.
Kyle: Well, Dave, I purposefully don’t hunt out of a tree stand anymore. I’ve got this nice six by six box blind with double-paned windows. It’s insulated. It’s got carpet in it. I purposefully bought that. That way, I could hunt in comfort. I’ve got a nice swivel chair in there that I tip my feet back. If the weather is too cold, I’ve got a nice buddy heater I put in there, and that’s purposefully so I can multitask and read, and really hone my skills while I’m sitting there.
Dave: So you’re always looking for an angle, aren’t you?
Kyle: I always, Dave. Life is about opportunities. It’s just a matter if you want to seize them.
Dave: You have a gun rack in that truck?
Kyle: Not in the truck.
Dave: Not in the truck?
Kyle: No. One under the seat. One in the glove compartment, but not in the back windshield of the truck.
Dave: Let’s talk about the Plain community and kind of some strategic initiatives that you’ve worked with the community, and they’ve probably taught you as well, but you always talk about how they manage. They’re very good at managing debt in their balance sheet. How have they been able to accomplish that, and what have you seen?
Kyle: That community is what I’ll call allergic to debt, meaning that there’s good debt, and there’s bad debt, and they’re focus is on minimizing the debt as quickly as possible. That community was hit with the recession just like any of our other communities. The difference is those business owners weren’t so heavily leveraged with debt, that they were able to ride it out and survive. They put debt on their buildings. They put debt on some of their heavy, larger pieces of equipment, but other than that, they’ve got line of credit’s, stuff like that to minimize the seasonality of certain other businesses, but other than that, their goal is to pay off that debt as quickly as possible.
Dave: Let’s talk about communication within the Plain community? How do you communicate to your clients in the Plain community?
Kyle: I think one of the things that separates Rea & Associates from a lot of other firms is that we get up out of our seats, and actually get in a vehicle and go out and see our clients. That is probably I would say our biggest strategic advantage in the community. Like I said earlier, we don’t have the typical accountants. We have a lot of people that want to get out there and get dirty. Walk the shop floor, give them ideas not only from a numbers perspective but also an operations perspective.
Dave: All this work you’ve been doing over the last year and a half, your handicap has had to suffer. What is your handicap these days? I always like to keep track on our guests, what they’re handicaps are, just in case.
Kyle: It got down to a 14, but then I think I was coming up to a tournament I was going to be playing with you, so I kind of sandbagged and got it back up to an 18.
Dave: Can you win money at 18?
Kyle: Yeah. Now, not me, no. Other people at 18, yes. I tend to buckle under the golf pressure.
Dave: I’ll bet you do. You’re a little bit shy and backward, I can see.
Kyle: Yeah.
Dave: Did you guys develop a really specific newsletter for the Plain community?
Kyle: With the help of our practice growth group, we developed Plain and Simple. One of the things that we wanted to bring to the community … that community has been great to us. It’s been great to our firm, and we wanted to give back. So one of the things that we did, we developed that newsletter that has not only just … we try to stay away from the boring tax articles, and the real technical things, and what we’re trying to get them to think about is the bigger overall picture of their business.
And like I said, too, with the fact that they don’t have access to technology like most of us do, we went old school. We went paper.
Dave: I would imagine that Rea & Associates is one of the few firms, if not the only firm in the country that offers these type of services to the Plain community.
Kyle: There’s probably others out there. However, in our market, our competition doesn’t have the wider range of services that we have. There’s tax accountants out there. There’s people that could do payroll. There’s those type of things, but when it comes to Lean Six Sigma, and it comes to costing analysis, and it comes to a lot of the other things that we’re doing, people don’t do that. They don’t have that ability. They don’t have … they’re not getting the training for their people in those areas like we do.
Dave: And what is a costing analysis?
Kyle: Well, I always say that in the manufacturing realm, I always say that nine out of 10 manufacturers don’t understand their cost to know what does it really cost me to product that widget? So one of the things that we’ve done, and I think this is one of the most popular services that we have, is number one, we go in there and we help them figure out what is their direct labor rate per hour? What’s their manufacturing overhead rate per hour? What’s their company break even in sales number? What is their revenue per employee? So on and so forth.
There’s a bunch of them, but one of the things is once you have that, too many companies out there want to take those rates, even if they think they have them, and then they just go I’m going to do a 3% increase on sales. Every product, I’m just going to increase at 30, or 3%. Most of them wish they got 30%. That ain’t going to happen, but one of the things that once you have that information, then what we do is we go out to the shop floor, and we start doing time studies on their products. How long does it take to make that product? How long does it take to make product B? Then you start applying those rates to it, and then you look at what you sell them for.
So rather than going out and going, hey, I’m going to do a 3% across the board, we’re looking at profitability but product, and that’s what’s separating them, and that’s why we can increase the bottom line for them like we can without having to just go out there and increase the top line. When you talk about people, and the success of their business, too many business owners focus on, well, I increased the top line 15%. That’s great for you. You just worked harder, and made less money. Congratulations.
Dave: These services that your group provides, these sound like services that are exclusive to very large companies, large manufacturers, but aren’t you taking these into the $2 million to $20 million companies?
Kyle: Dave, yes. A lot of these services we have to offer in our niche is really working with the 2 to 20 million, in that 2 to 20 million in sales space. I’ve got a client that started working with them three years ago. They were at 1.5 million, and December 31st they just crushed the 7 million mark. So in three years they went from 1.5 million, and losing money, to 7 million and making quite a bit of money.
Dave: What’s the manufacturing climate within the state of Ohio? How are we ranking?
Kyle: Manufacturing is doing great. A lot of industries, the Ohio economy and the worldwide economy is doing well. Ohio from a manufacturing perspective is doing great, and there’s a lot of things going on. A lot of invention. A lot of R & E, that type of thing, so I think Ohio is very strong in manufacturing.
Dave: We just went through or in the process of going through a pretty major tax overhaul. What are you seeing in the manufacturing community, the impact of the new tax rules?
Kyle: Dave, I think the biggest thing for manufacturing, the bill was very heavily weighted, and very favorable for manufacturers, especially when it comes to expensing of equipment in the first year, and those type of things. So I have some involvement with the National Association of Manufacturers, and do some visits there in Washington DC, and one of the things that … they were very heavily involved in that tax bill, so I think manufacturers, when you talk about industries, and you talk about individuals, I definitely think manufacturers won in that tax bill.
Dave: How many times a year do you meet with year clients?
Kyle: Depending on the size, depending on the services, honestly, I tend to … I don’t take on clients if they’re not willing to meet with me throughout the year. I’m a firm believer in our firm has more to offer than just doing tax returns and compliance, and our time is valuable, and we want to make it value added for our clients, so I personally will not take on a client unless they’re willing to meet with me two to four time a year.
Dave: We talked about several solutions that you’ve been able to find for the Plain community. What’s on the horizon for 2018? What solutions are you guys working on? Your crew?
Kyle: Dave, if there’s a problem, we’ll find a solution.
Dave: You’re not going to let that cat out of the bag. That’s top secret.
Kyle: Top secret.
Dave: Well, those solutions are certainly unique to each company.
Kyle: Most definitely. I mean, depending on what their issues are, I met with a client this morning that wanted to talk about incentive compensation. We went out and talked to them. Gave them some ideas, talked to them. What are they really trying to accomplish? I always tell clients, “What do you want the end point to look like? If you can tell me what you want the end to look like, I can help you build some scenarios, and processes and procedures to get you there.”
Dave: In the last few minutes we have, let’s bring this home. What are your top three concerns that you’re seeing in the manufacturing industry in 2018? What are the top two or three issues?
Kyle: Hands down, number one, two and three is the availability of people. Because of the fact that unemployment is so low, and these manufacturers are growing so rapidly, they can’t find enough people to produce. So I wouldn’t even say there are two and three, because if we don’t take care of one, and they don’t find a way to do more with less, they’re either going to have to be happy with where they’re at, or they’re going to have to figure … there is no other option. I mean, it’s either people or technology or becoming more efficient and effective. So hands down, any client that I go out and talk to, their biggest issue is people.
Dave: Thanks, Kyle, for joining us today on unsuitable. Our guest today has been Kyle Stemple, President of Rea’s East Central Ohio region, and he’s been here to talk to us about the Plain community, and the manufacturing industry in general, and thanks again for joining us today. We’re going to have to have you back, and thanks for some of the great insights from the Plain community.
Kyle: My pleasure, Dave. It was nice to come back to see you. You don’t look a day under 30.
Dave: Thank you. Appreciate that. They’ll be some parting gifts for you today as you leave the office.
Kyle: I appreciate that, Dave.
Dave: So listeners, if you’d like to learn more, send and email to podcast@reacpa.com, and if you haven’t done so already, don’t forget to subscribe to unsuitable on iTunes, or check out video from today’s episode on Rea’s YouTube channel. Thanks for listening. Until next time, I’m Dave Cain encouraging you to loosen up your tie, and think outside the box.
Disclaimer: The views expressed on unsuitable on Rea Radio are our own and do not necessarily reflect the views of Rea & Associates. The podcast is for informational and educational purposes only and is not intended to replace the professional advice you would receive elsewhere. Consult with a trusted advisor about your unique situation so they can expertly guide you to the best solution for your specific circumstance.