Dave: Welcome to unsuitable on Rea Radio, the award-winning financial services and business advisory podcast that challenges your old school business practices and the traditional business suit culture. Our guests are industry professionals and 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. I’m your host, Dave Cain.
No one ever hopes their business will be hit by a disaster, but unfortunately for some, it’s an unpleasant reality. From combating cyber criminals to guarding against natural disasters and preventing costly accidents, if a disaster were to strike today, would your business survive? Today’s guest is Victoria Burton, the Chief Financial Officer at Burton Metal Finishing in Columbus, Ohio. Her company’s primary facility experienced a tragic fire back in 2013, and after this unfortunate disaster, she and her family were faced with a difficult decision: Walk away, or rebuild? It took a couple of years and the road was not easy, but in July 2015, the family was able to reopen its doors bigger and better than ever. Today, Victoria will tell us how she and her family rebuilt their family business. Welcome to unsuitable, Victoria.
Victoria: Thank you for having me today.
Dave: First of all, I guess I need to talk about … I referred to you as the Chief Financial Officer. Also, you’re the controller, you’re the accountant, you’re the HR director, you’re the accounts payable clerk, and you’re the accounts receivable clerk. You reconcile the bank. I think you do it all over there.
Victoria: Yeah, those are the advantages of being a small business.
Dave: Welcome to small business, isn’t it?
Victoria: Amen. Yes.
Dave: One of my favorite memories, visiting your facility right after it was rebuilt, is your brother Dan made lunch, and it was Reuben sandwiches. It was the greatest Reuben I’ve ever had.
Victoria: He’s a good cook. Reubens are his specialty. We joke around and say we need to put a card out in the front of the building. He’d probably make more money.
Dave: We might have to do that. As I mentioned, Victoria is a third owner in Burton Metal, along with her brother Scott and her brother Dan. It’s a third-third-third. First of all, do you guys ever fight?
Victoria: Absolutely. I mean, you know, being a family business, there’s fine lines, but we respect each other’s position, and we know if we cross that line then you’ve got consequences, and those are consequences that you don’t want to experience.
Dave: Don’t want to be on your bad side.
Victoria: No, we don’t.
Dave: For those of our listeners who are advisors or business owners and do a lot of task switching, I want you to do two things. One is, take a sticky note and write down the following, to make sure you set aside time to renew or review your insurance policy, and understand your insurance policy the way it reads and the way it works. After we go through this story, I think you’ll understand the reason for that.
Burton Metal, during the recession had a difficult time, as did most manufacturers across the nation. Revenue were down, customers were going out of business. It was a very difficult time. Shortly after the recession, Burton Metal began to recover, meeting their sales numbers, having some of the best months in the history of the company. Then on October 4th, 2013, a three alarm fire hit the business. It took the company 22 months to open. During that time they lost 96% of their clients. The roof of the building was gone. Equipment burned, gone, destroyed. The wastewater treatment, which was the heart of the business, gone, destroyed. Victoria, I guess we’ll ask there, how did you feel when you got the call? What went through your mind when you got the call that Burton Metal was on fire?
Victoria: Well, first my brother was still in the building, so our priority was to get to our facility and see if he had gotten out of the building. Of course, because of the type of business we have with the chemicals and stuff, they wouldn’t allow my brother and me to get down there. The fire happened around 5 PM, and we could not see Scott until it was close to 11 PM. To be honest with you, I think our first priority was, “Thank god that the employees were not in there, and that we knew Scott had gotten out.” Then, we just went into mode. We start calling insurance brokers, and you’re a business owner. That’s just what you do. You go into a certain mindset that you have to take care of whatever problem you’re presented with, but it was a shock. We’ve been in business now 29 years, so there’s a lot of history with my dad who’s no longer with us that we knew that was going to go, that was gone.
Dave: The good news, there were no injuries. No fatalities. That’s the one thing we can walk away from and feel pretty good about that part of it. Now, rumor has it that your brother Scott was in the office trying to secure a deposit or a check, a deposit slip for the day? Was that ever confirmed?
Victoria: That is true. We were just coming back from financial struggles, and so every dollar, we were so appreciative of. Scott had the deposit, and the deposit envelope had the smoke mark with the rubber band on it. He went back into his office and he got the deposit before he went out the window with the fire department, and he also threw down the key to get in the front door while they were trying to knock down the front door, and he was like, “Don’t break the door down. I’ll give you the key.” The Fire Chief came back and told him that he could have got into a lot of trouble. She’s like, “Why would you go back for a deposit?” He’s like, “It was a good one.”
Dave: “It was a good deposit.” It’s the joys of a small business. Every buck counts.
Victoria: Every penny.
Dave: The next move was, obviously there was a lot of discussion and the insurance company came in. Your policy, if I remember the discussion about your policy, there weren’t many different components of that policy. There was the property and casualty, the business interruption, loss of personal belongings, loss of data. It was a pretty extensive policy, and there was also a section in there of the policy that would allow you to bring the building back to code. That is something that I think is in almost every policy. That has also caused a great concern for your guys as you began to rebuild. We’ll talk about that in a little bit, but as you went through the thought process and met with the insurance company and your advisors, you had to stop and think for a minute, “Should we go forward? Should we rebuild, or should we put the money in our pocket and walk away?”
Victoria: Absolutely. This was kind of what the three of us thought about. The easier way, which Burtons do not do anything the easy way. We always have to do things. We don’t quit. We don’t know how to quit. To be honest with you, our first thought was our employees. We’ve been in business 29 years. When they started with us, most of them were in their 20s or 30s. Now they’re at an age to where they couldn’t go get a job. We made my dad a promise that we would always take care of our employees, so our employees was the first thought. The second thought was customers, and so when we discussed about walking away, we just had a really hard time trying to settle.
For us, too, our business was so attached to that building because we are a metal finisher. There are trenches that go to the waste treatment or utilities. We’re not a kind of business that can just pick up and move to any facility. We are a type of business that is really attached to the building that we are in. We knew that we couldn’t just pick up our plating tanks and go find another warehouse, because that wasn’t going to work. When you invest 29 years into trying to make a building fit your business like a glove, it’s really hard to make that decision. I’m sure if our business was a different type, we probably would have made a different decision.
Dave: It was the uniqueness of Burton Metal Finishing that caused you to … One of the causes to decide to rebuild.
Victoria: Yeah.
Dave: Plus as a third generation business, I believe there’s seven, sometimes eight Burton family members working in the facility, so it was a lot more than just you and Scott and Dan. You had to look at the entire Burton family.
Victoria: You did. You had to look at, and that was the extended family. That was family, meaning our employees. That was the third generation of the kids that were trying to train for the business. There’s just a lot of history in that business. That business we started with my dad and my mom, and so there’s a lot of memories in that building too. Those are memories that you will not have if we pick up and move. You’ll never get those same memories in any warehouse. It comes with a lot of emotion, family business, but just how that business was built 29 years ago from nothing. There’s a lot of emotion attached to it.
Dave: Let’s talk about the business interruption insurance. I think if there’s a message that we can share and shout out to our listeners, it’s that business interruption insurance is extremely important. It played a vital role during the period that you guys were rebuilding.
Victoria: We would have had to close the doors if we did not have business interruption. I cannot stress enough how important your business interruption is, because the insurance company goes back. They take a percentage of what your sales were over a certain specific period of time, and that is like a subsidy for you. For us, metal finishing was our greatest revenue maker, and that’s what went down for 22 months. Powder coat could not compensate for the revenue that we lost. If we would not have had business interruption, we could not have kept our employees employed. We could not have paid for their benefits, because there was no change in their benefits or their wages during that whole 22 months. We were able to keep everybody employed just like they were the day before the fire. It helped you pay all of your expenses, and to be honest, it was for 15 months that we knew that money was coming in, and it was one less stress, but most companies are not going to survive if they do not have business interruption, unless you’ve got millions of dollars in a checking or savings account somewhere.
Dave: Did you understand the business interruption insurance before the fire? Did you guys routinely look at that and say, “Oh, I understand that”?
Victoria: No. Our policy, we were just like probably everybody else in the whole entire universe. We had a policy, we took it for granted. Scott would always review it with our insurance broker once a year, but what you think before a disaster, of that you’re going to have enough money compared to the money it takes to rebuild after a disaster, they’re two totally different topics. Business interruption, we did not fully understand it. What was our saving grace is Scott changed it just a couple months, and added to the policy business interruption, added it two months before the fire hit. Otherwise we wouldn’t have had it. He had a gut feeling. Like Dave said, before the fire happened, we were struggling financially because a lot of our customers had left Ohio, and so we were counting every penny. Scott was really hesitant to go with it because of the added cost, but there is no … I cannot stress enough. I don’t care what it costs. You can’t live without it when you have a disaster hit you.
Dave: That’s a great comment, and again, I think if our listeners, they look at their policy later today or tomorrow, focus in on the business interruption. The property and casualty is a little bit easier to understand, but the business interruption and the calculations are very complex. Everybody should understand that, and like you said, you learned a lot about that business interruption insurance after the fact. I think your message would be, “Hey, take a look at that.”
Victoria: Yeah. You’ve got to look at business interruption no different in your policy than you would paying for your rent, paying for your utilities. You have to look at that no differently, because in a disaster, and we all think it’s never going to happen, but when a disaster does happen, you do not have the capability to change anything on your policy. What you have is what you have to survive with. If you do not have enough, you have nowhere else to go. Out of any part of your insurance policy as a business, business interruption has to be top on your list, and it’s worth every penny extra that you pay for it.
Dave: You know, you talk about the building that your dad, your parents started the business, and your dad was instrumental in that, in buying that building and developing the business. How old is the building, or how old was the building before the fire?
Victoria: The building was built in the 1960s, which that played a major role in the cost of the rebuild.
Dave: Your policy, you had coverage to bring the building up to code. To bring a building that was built in 1960 up to code standards today is a large number.
Victoria: Absolutely. If there’s one thing other I’d like to stress, is that our building was in the 1960s. As a commercial client, we had $250,000 in coverage, which was pretty substantial in commercial terms. It cost us over $1.5 million that Dan and Scott and I had to take on to bring everything up to date to the code that the city wanted us to.
Dave: The majority of those dollars were uncovered, or not covered by insurance. Did you guys have business assets to cover that shortage?
Victoria: No. We went to our bank. They were able to go through a CCDC and through the city and county we were able to get some loans, but Dan, Scott and I have had to take on that financial responsibility because our insurance did not cover what code was, and we were naïve. We thought $250,000 was a lot of money. It is nothing. I will tell you that just a loan, an example would be we had to put in eight eye washes that had to be timid, so it had to be heated. Those eight eye washes were $10,000 apiece. That’s $80,000. If you take $80 from your $250, you’re not left with a lot of money left.
Dave: You had to borrow from third party, the bank, and others. You put money in. Did you put money in from … Did you loan money to the business from your retirement accounts?
Victoria: Yeah. We’ve had to take everything that we’ve put away for, for retirement, we’ve had to take that back out. All three of us have had to supplement our business with our retirement, our 401.
Dave: My understanding is you also took early distributions from your 401K to put into the company’s cash accounts?
Victoria: Yeah. That’s what’s kept us going, so we have taken out of our retirement, and we’ve had to be penalized for that because we are not at the age to where you can do that without paying taxes. Not only for the two years being down, but the year trying to come back has been a difficult journey, too. We’ve had to take a lot from ourselves personally in order to keep things moving forward.
Dave: It took 22 months to be 100% operational. Even today, there’s a line that still needs to be added. I guess we’re not 100% operational, but you lost 96% of your customer base, and here we sit today. How much of that have you recovered, percentage wise?
Victoria: You know, Dan and Scott and I have sat down and we’ve thought about it, because we always pride ourselves in quality and service. Maybe it’s because our name is on the building. We really thought that our customers would come back after the fire, and we don’t have 50% of those back yet. We’ve been focusing on new clients, because 22 months, our competitors have found ways to service the customers we had before the fire in the manner of which we did, and so in some ways, coming back, we’re playing by all new rules and a whole new way of doing business. It did take away a lot of our clientele.
Dave: Here we are, a little over three years from the fire. You’re still not back to pre-recession era.
Victoria: Nope.
Dave: It may be a few months or years.
Victoria: I would say, you know, when you have the fire, you’re doing everything you can just to keep moving, to get the building and the business back up and running. You don’t really have time to think about, “What is it going to be like after?” I can probably tell you that the last year has probably been just as big of a struggle as rebuilding, for the reason at least we had business interruption and we had a subsidy coming in every month. Now, it’s all up to us, and if we don’t bring in that revenue, if we don’t bring in those customers, then you don’t have enough funds to keep your employees paid and to buy the products that you need to produce your parts. It is very difficult, the year, because you can’t go to your bank, because you’re already maxed out financially because of the code upgrades. You’ve taken out of your retirement. You have to really look at the year that you get back up and functioning. What you’re going to do is to supplement the revenue until you can get back up, because it’s basically like starting a business from scratch.
Dave: After the fire and all the insurance payouts, did the insurance company renew your policy?
Victoria: No. The day that we had Business First come out, we had a lunch and we received notification, and it was dated, like, the same day that I got the last payment, which is pretty rough because, you know, if anything, you’re at a better place now than you were before the fire. If anything, we’re a better prospect to have as a client, and that’s something that really bothered us because you were cut down, basically, at the knees. Who were you going to get? It was a scare, of what the costs was going to be to be insured by a new person or a new company. Would a new company be willing to take you on, because of the debt that was paid out? That’s another scary aspect of your business.
Dave: Knowing what you know today, would you do it over again?
Victoria: You know, we’ve asked ourselves that question, and I’ll be honest with you. There are days I would type up a sign and say, “Out of Business,” and post it myself. You have good days and you have bad days. I think that it depends on how much passion you have for your business, and I’m sure for us, it’s probably different, because we’ve got … When I look in a room and I talk to somebody, I’m not looking across the table at a coworker. I’m looking across the table at my brother, who I know love my sister in law and his kids. We’ve got our third generation that we’re trying to train. When you look at it from that perspective, when you look at it from all the integrity and hard work that it took, the answer to that question would be, “Absolutely. We would rebuild.” When you look at it and you take all the emotion out of it, and you look at it from a logical business perspective, we probably would have taken the money and made other decisions.
Dave: Our guest today is Victoria Burton, Chief Financial Officer of Burton Metal Finishing in Columbus, Ohio. We invite our listeners to go to the website, BurtonMetal.com, and take a look at the company. You’ll find a family, generation business that is high on quality, high on service. They’d love to do business with you. Give them a call. If they even stop by, Dan may make them a Reuben sandwich.
Victoria: He probably would.
Dave: Before we wrap up today, we ask a fun question to get a little more insight into the minds of our guests. One of the pictures that I saw of Burton Metal is a family picture, and guests, and employees. Out in front, there was this little guy, and I believe after investigating, his name is Dallas Burton. Dallas happens to be your son. Obviously with a family your size, you and Dallas have established some tremendous family tradition. Can you share a family tradition that you and Dallas share on a regular basis?
Victoria: Absolutely. As a matter of fact, I was talking to him about that this morning. One of the first things that’s a priority is we have to make the reindeer food. We get oats and glitter, because the glitter directs the reindeer to our home. Well, we happened to get half of our neighbors involved, so now we have all the kids sprinkling oats and glitter all over the yard. Then we leave carrots, because you know, they get hungry, because the reindeers work really hard. My mom will spend the night, because the other grandchildren are in their 20s, and they’re getting engaged. Dallas came into my mom’s life when my dad passed away. She spends Christmas Eve, and then usually he gets to open a present, and then the tradition that comes from my childhood is my mom’s parents would always come over, but we’d have to wait. They’d take their time. They’d get their coffee, and then they would get the rolls, and then it would take them a half an hour to walk down the stairs. I know this may sound cruel, but I do the same thing to him. I make him wait until I get my coffee.
Dave: What a wonderful tradition. We love hearing about that. Again, we invite our listeners to visit the Burton Metal website. I think you’ll find a really fantastic company, and some energy, and the story is just compelling, and just a family of resolve. Please check them out. Again, thanks for joining us on unsuitable, Victoria. Thank you to our listeners for tuning in. We have a lot of great leadership and management resources for you at www.reacpa.com/podcast. If you have any questions, email us at podcast@ReaCPA.com. We’d also love to hear what you think about unsuitable on Rea Radio. Comment on this episode on SoundCloud, or review the podcast on iTunes. Until next time, I’m Dave Cain, encouraging you to loosen up your tie and think outside the box.