Cutting Edge Technology and Forming ESOPs in your Manufacturing Company With Jason Azevedo

Lisa Ryan: Hey, it's Lisa Ryan, and welcome to the Manufacturer's Network Podcast. I'm excited to introduce our guest today, Jason Azevedo. Jason has had the heart of business development since an early age, starting a very successful apparel company that grew from humble garage beginnings to annual gross billings of over a million dollars at age 15.

By age 18, Jason was doing millions in business with Starbucks, Nike, Disney, Marvel, Volkswagen, Audi, Lucas Films, Dodgers, and countless NBA teams. Jason, welcome to the show.

Jason Azevedo: Awesome. Thanks for having me, Lisa.

Lisa Ryan: So, I know you had an early start, so share a little about your background and what led you to do what you've done.

Jason Azevedo: Yeah. I'll tell you a story about what it is. First, I've got to set the stage. It was February of 2007 when we started our first company. I'm 15, my brother's 20, and we came from a household where our father worked in a factory, where he worked the graveyard shift for 28 and 29 years for the same company. In the last six or seven years of working there, he got laid off about that many times because there were so many changes in ownership.

My brother and I were watching what the most profitable plant in the country for these companies was. That's why they're able to keep on selling the plant. But they had messed up the relationship between the management and the employees so badly that the plant was almost impossible to own. So we got to see it from the employee side and what that does to a family. There's a person's dynamic when there's all that turmoil going on within manufacturing. So we launched our first company at 15, believing we could do something special for the people. And really, it didn't have to be that toxic environment in a manufacturing plant.

We started with t-shirts of all things. And because it was February of 2007 when the market crashed, about a year later. So we took a left turn, went with the most complicated production possible, and got ourselves onto the cutting edge of that industry.

What ends up happening is a ton of clients are available because companies are going out of business left and right. So it left very strong clients that needed cutting-edge work to stand out in a tough market, which launched.

Lisa Ryan: Besides t-shirts, what exactly, what were you doing when you saw the economy taken a dump, and all these companies were looking for help? What were you doing for them?

Jason Azevedo: We started in t-shirts, and that, frankly, that great of a business. As I said, the market fell out, and at that time, a lot of what we were doing was for a 15-year-old kid, and it was family reunion shirts or giveaway shirts. All those budgets disappeared, whether it be on the personal side or the corporate side. We cut and sewed the shirts, doing the craziest things possible. Also, there was a massive push to switch to more environmentally friendly inks. We were helping develop those with the ink companies on how to use them worldwide.

It became a movement into the current apparel cycle, and we even got into doing cup sleeves for coffees made from denim. So just making anything based on apparel or textile and trying to develop it in a more modern, more cutting-edge way throughout the product's life cycle.

Lisa Ryan: What were you doing with Nike, Disney, Marvel, and all of these? So just so talk a little bit about this. Why did they reach out to a 15, or maybe by this age, 18-year-old kid to do this for them?

Jason Azevedo: So interesting things happen when markets crash. Prominent players will start having cash flow issues, which we saw happen in 2008. A company servicing Disney, Nike, and Adidas will typically be this massive conglomerate in the space. Those guys started having problems and couldn't keep the doors open because of cash flow. Suddenly, a company like Disney of the world or a large organization like that they don't have a place to go, and they're searching for somebody to take something on.

The other part is it has to be somebody that, when you've got your marketing budget. There are two schools of thought. There's either spending way more on fewer items or less on more things, and it's a volume versus a quality issue. Many companies realized, hey, I can't give away a hundred thousand shirts a year anymore. I can't give away a hundred thousand pieces of apparel.

But what if I can give away 10,000 that makes an impact? And that's what we are going to people and selling them is, hey, the those free the ugly chintzy things that you were doing that doesn't work anymore.

I'll give you an example. We worked with a prominent cybersecurity company and helped them develop their trade show booth. And when you would walk into the booth, they gave out shirts with the company logo on them, and it was okay, whatever. And they told me where the shirts are, and we'll give you a giveaway or some of that. So people would walk into this trade show booth wearing this piece of apparel they were given that looks like a cheap giveaway. As soon as you walked into their booth, we had embedded photo chromatic inks into it. And suddenly, all these cybersecurity terms would start showing up all over the clothing you're wearing has the company sitting there going, See when you're with us, you can see all the problems. Wow. So that's what we were doing. We were selling way more than, Hey, this is cool. We were trying to ensure those marketing budgets were going as far as possible.

Lisa Ryan: Oh, that is so interesting. So then from t-shirts, where did you go?

Jason Azevedo: We ended up moving into the retail display, another transition point. We got into producing the in caps in all the major box stores and Best Buy and Fry's Electronics. And this was really during that time when everyone called the retail apocalypse.

But really, it was a change in the market and how you market in-store and what you were looking for and embedding a lot more communication between the client and the display, whether that be buttons or integrating control systems that turn on lights and interact with the person that's looking at the display.

What ended up happening is we started that display, that company largely assembling components bought by other people. So we would design them, send them out to somebody, they would make our sheet metal, or they'd make our plastic, or any other combination of people couldn't hit the standard that we were looking for regularly.

We started buying or building all of those sub-companies, whether a button manufacturer, sheet metal company, injection mold or print division.

We started honing in on all these different manufacturing types to build these displays. You went out, but you weren't finding the quality of the needed products, so you just started buying from companies.

What did that buy or build the companies? And it wasn't necessarily the quality as we were in the marketing sector. Marketing's a very fast-paced industry, and we noticed that American manufacturers we were talking to in our local area are quoting 12 to 16 weeks lead times. In the marketing world, 12 to 16 weeks is insane. That that there's just, that, that timeline doesn't exist. We couldn't get the responsiveness we needed, so we started building the companies ourselves.

Lisa Ryan: What were some things I know we talked a little bit about before the show that you are working with legacy manufacturing companies and helping bring them to that next level? So what are some of the things you've done that have set you and those companies apart to get them into a different way of thinking?

Jason Azevedo: What we do nowadays is we buy legacy US manufacturing companies. Usually, they're going to be second, third generation companies with no planned-out succession plan. So they're giving away to make sure that the company stays safe in the community that it's in but also adds that energy level that, and new processes that we develop whether that be real new age automation and how we have robotics or automation or computer systems control more and more of the pro the process or just modern processing in general?

During the late nineties, the big one was kaizen and all these buzzwords. There's a new age of mixing that with technology, and how do you work with that? And because many of the companies we purchase from are second or third-generation. They haven't gone through that transition to becoming, to use a buzzword, a lean organization, or focused on how we bring the production size down or up as much as we want but not have it affect our internal plan.

Lisa Ryan: There are so many things you said regarding succession planning because when you pass that second or third generation, who will you give it to them if the kids are no longer in or the grandkids are no longer in there? And then, of course, there's always the fear of automation of people coming and what jobs will replace, or how will that modernize us? If somebody listening to this show is in that space where they don't know what the next thing is, what are some of the things that you've helped these manufacturers do, or I guess look at it differently when it comes to creating that legacy that they worked so hard to build?

Jason Azevedo: Yeah, so you hit on something that I like to take on head-on, and it's something that we have to take on head-on when we go into companies. It is a fallacy that automation removes American jobs, right? On the contrary, it gives them because automation and innovation are why the competition from low-wage countries is fading quickly.

That tool allows American manufacturing to grow and fulfill its need; if manufacturing companies do not automate, there is a considerable problem—why we're consuming products three to four times faster than we did in 20 years? Yet have the same manufacturing force.

If we cannot produce three to four times faster, we cannot have the products that the industry requests. So we always take that head-on if automation is not something to be feared. On the contrary, automation is the tool that allows American manufacturers to compete with anyone in the world because now you can pay a good wage and get products.

Lisa Ryan: Not only that, but many younger people also coming into manufacturing have this idea of it being dark, dirty, and dangerous, and now you're showing something clean and modern. Somebody walks into a plant, sees a robot, or sees automation. It brings a whole new level of attraction to manufacturing because it busts what they thought it would be because you have to have a clean environment to have robots.

Jason Azevedo: You hit on another thing that's near and dear to our hearts because of that mentality that people have stuck in their heads that Charles Dickens dirt floors, machines throwing grease everywhere. That's most people's picture of a manufacturing plant. That has directly caused an issue with succession planning in the space. An entire generation of kids was told to do anything but go into a plant, whether from the leadership side or the floor side.

They were told about any industry on earth other than manufacturing. I was told that my brother was told that. We didn't listen very well, but we were told that. So that is causing this gap: not a large class of people coming into the industry. And we're trying to get as many people into plants as possible and show them, Hey, this is not what you used to think about it.

If you look at the Tesla drone footage going through their plants, they look like dealerships, not plants anymore. They're white floors and bright lights like they're gorgeous. And if we can get people to break that stigma, now you've got a strong industry brewing around you.

Lisa Ryan: If you look at it from a parent or guidance counselor, the kids' thoughts begin regarding what they will do with their career here. You have a great job, good money, and excellent benefits, and when you leave work, for the most part, you leave work. It's not so work-life balance - not that there's ever any balance, but work-life integration is a lot easier if you're looking into some of these types of jobs in manufacturing for that reason. Plus, you're making good money without a lot of student loan debt because you don't necessarily need to go to a four-year college.

Jason Azevedo: That's where the beauties of manufacturing are. Throughout the manufacturing industry, pretty much every job will pay you to train you on-site. This is not a, Oh, get an education, hope you get a job.

They will walk into most manufacturing companies and say, " Great, let me show you how to help me. Let's do this. And that's a massive step in the right direction. Also, I think you've talked about it a little bit, but the technology and connecting these new employees with the mission.

Lisa Ryan: I often run into this conversation about these people saying these kids don't have a work ethic. They won't pay their dues. Nobody is paying their dues anymore. We're connecting differently than we had, knowing they see the world differently regarding technology.

So there's a lot of this old mentality that we have to, little by little, start to get out. Because if we're looking at 3 million manufacturing jobs going unfilled and not enough people to them, to begin with. It's a cleanup job. We have our work cut out for us.

Jason Azevedo: We've got a generation that was told to stay away from the industry, and if not two generations, unpacking that will take time and what it's created. This is somebody who was told not to go into this industry and that it was a horrible place to be. So it takes showing that it's not an awful place yet. There was a period when it got really ugly because we had a sudden issue competing against low-wage countries, but Americans did what Americans do, great. They innovated their way out of it. And that understanding is from craftsmen who have been in the manufacturing industry.

For 40 years or a new person coming in, you need to convince both of them that the times have changed, and if the second you can do that, the two can learn from each other. Huge. And one of the things that we run into is there. One of the significant parts of automation is that it's taken away many painful jobs that destroy your body. So any plant should first consider getting rid of those jobs with automation. So that whole pay-your-dues side is part of its running away because there isn't a machine to stick the young guy inside and make him turn a wrench all day on it. So it doesn't exist anymore throughout a lot of these.

Lisa Ryan: The other thing we have to consider is workplace culture. You said at the beginning of your career that there were a lot of toxic companies out there, and believe me, there still are, but creating the workplace type of culture brings people in where they feel valued, acknowledged, and depreciated. And I know that you have also explored the opportunities of ESOPs where not, you're not only getting people to buy into their mission, but you're helping them to become owners of the company, which would create that loyalty. Can you talk briefly about what you're doing from a workforce standpoint to make that great environment?

Jason Azevedo: Yeah, so every, because we buy legacy companies, you also purchase legacy attitudes, legacy quality, let you buy what this company has Been. So we purposely do look for companies that have a better culture than most because it, frankly, it's easier to start from there. But one of the biggest things you put on you went to the ESOP. We, the general partners for MRCA. When we got together to build this company, we promised to give ESOP 100% of the share in under ten years. So the entire national portfolio, if you work for MRCA, you're getting the share, which was the promise we made to everybody. And frankly, that goes a long way with culture when people feel they have a piece of it and are part of it.

But I'll give an example. We're very fortunate. One of our heads of manufacturing was one of the early Tesla people. He came in the other day. He says I want to put plants on the shop and the plant floors. Okay. Why? Because working in a concrete bunker isn't, it's not comfortable. So why doesn't the shop floor get plants if the office gets plants? Excellent point. Okay, let's get plants on the shop floor. And so it's simple stuff like that. We have a company of ours that we just took it, that all office engineering, and all other employees, now sit on the shop floor.

There are no offices at all. Because the question came up, why is one different than they have to take phone calls? Great. Then we've got phone meeting rooms, but you're in the plant the rest of your day. And so stuff like that goes a long way. A couple of years ago, 4th of July, we're an American Manufacturing company.

The 4th of July is a big day for us. So we were running for 24 hours. And we could not because, and this was, there were still some covid rules going on. So the only way we could do a barbecue for everybody was for the owner personally do the barbecue for 24 straight hours and individually package everybody's lunch that day.

Lisa Ryan: Wow. You can't replace that. We talked about paying your dues as ownership. You got to pay your dues. People must know you're willing to go to any portion of the company, and the culture starts building itself. You start getting people that genuinely believe in what's going on. And it's funny because it sounds like that takes a lot of time to do something like that. Would you instead spend time connecting with those employees by having something fun like a barbecue they've probably never experienced in their career before?

Or would you rather spend your time interviewing new candidates for jobs because you keep losing them? So when we build that strong culture, it gives us the time and the creativity to do new things because you're not spending all of your time trying to recruit and attract new people in a market where they're just really hard to find.

Jason Azevedo: There's a famous Richard Branson quote that I, that we live by, and it's, people, ask me what if you invest all that money and time in people and they leave? What if you don't, and they stay? But it is a lot of work. Culture is a lot of work, and the reality is that manufacturing, specifically in every industry, loves to say we're in the people business. No. We are in the people business. We use more person-hours than pretty much any other

industry. And the reality is manufacturing companies sell person-hours. So if you don't realize that your number one asset is the human, you'll be you won't get how the industry runs.

Lisa Ryan: Yeah. There was another Richard Branson quote that I love, and I'm probably going to get the words wrong, but basically, he said, train your people so that they can leave, but treat them so that they won't.

Because, like you just said, you're investing in your employees. You're giving them the tools and the resources to be better tomorrow than they are today.

And when you treat them well so that they feel connected to...