By Verne Harnish
If you’ve ever bought a plastic pipe, fence or deck railing for your home, there’s a good chance it was created using a manufacturing process called plastic extrusion, where plastic is melted and formed into products.
Plastics Extrusion Machinery (PEM), a 75-employee company in McPherson, Kansas and Tumwater, Wash., makes equipment and tools for plastic extrusion plants. When Nathan Spearman, a veteran manufacturing CFO, came across PEM a few years back, he was excited by the possibilities for growth at the company, which then had $2.5 million in annual revenue. “I realized it was a diamond in the rough and had lots of opportunity,” he recalls.
By late 2017, Spearman decided to take the plunge into business ownership and acquired PEM. In the next two years, Spearman, now its CEO, purchased a rival company in Washington and bought the intellectual property of another competitor in Costa Rica.
Spearman’s instincts about the company proved to be correct. In 2020, PEM brought in $13 million in annual revenue, and is now projecting $19 million in revenue for 2021. The company broke ground on a project adding 73,000-square-feet of corporate office and manufacturing space to its facility in McPherson in September 2020. This will expand it to a total of 135,000 square feet of finished space.
Spearman pulled it off by working closely with Scaling Up Certified Coach Rob Garibay, whom he knew from his days at Alltite, an onsite calibration company, where Garibay had coached the executive team. By applying the principles of Scaling Up: Rockefeller Habits 2.0, Spearman and his team positioned PEM for rapid growth.
Get the right people in the right seats on the bus
Spearman’s first initiative was reorganizing the company’s senior leadership team. After doing DISC personality assessments, Spearman and Garibay moved some executives into positions that better suited their talents and experiences. For instance, they discovered that the leader of PEM’s engineering team was so knowledgeable about its products that he was well suited for a key role in sales.
The company also established PEM Academy, a self-paced leadership academy, open to all employees, that is designed to put them on the fast track to personal improvement. Once they complete the courses and necessary reading, they can qualify for a bonus, mentoring and potential promotions.
Putting faith front and center
One thing that Spearman and Garibay have in common is a strong faith. “We have a soul-to-soul connection,” as Garibay puts it. As they worked together, Spearman says he realized it was okay to be transparent about the fact that he is a Christian businessman.
Spearman kept his beliefs in mind as he and his team developed PEMs’ mission and core values. The company’s core values, for instance, state the team values faith, people, truth, trust, humility, excellence and service. “I realized it’s okay to put it out there that it’s how I believe and how we are leading our organization,” Spearman says.
The company has also brought purpose to its pursuits by working with the nonprofit organization Water4Haiti on a project to put 50 water wells in Haiti. Spearman says it is all part of the company’s mission: “The focus is on serving humanity,” he says.
Reinventing a company
Having strong core values as a compass has been helpful as PEM has built on its foundation of creating downstream equipment for the PVC industry. Since Spearman acquired the company, the team has focused increasingly on innovation. For instance, it has upgraded the heating system in one type of machinery it makes.
The company has also augmented the services side of its business to increase revenue. “As we begin to add more capacity and better execute, we find we have additional capacity we can sell to someone else,” Spearman says.
Keeping cash flowing
Spearman also gave close attention to the Cash part of the equation. Using the Scaling Up methodology, the team did a detailed cash flow analysis. “It becomes much easier to focus on strategy and execution, with cash in the forefront of our minds,” says Spearman.
Spearman knows there is still plenty of work ahead. His first few years of business ownership taught him a powerful lesson: Making big changes takes time. “You’re going to think you have something mastered,” he says. “Then you figure out later you’ve got to make some changes.”
With the results he already has to show for doing so, he’s up for the challenge. Says Spearman, “You’ve got to be agile.”