Interviewer: Dexter Diepholz
Interviewee: Mark Lockwood
September 12, 2014
Mark Lockwood, founder and President of LabStrong Corporation, Dubuque, IA
LabStrong Corporation designs and manufactures for the lab equipment specialty market, focusing on product development for tailored, high quality lab equipment applications. LabStrong develops concepts into functional, marketable products by listening and responding to customer’s unique performance requirements.
The following transcript contains paraphrased questions and responses to questions and has been approved by Mark Lockwood.
How did you come about starting LabStrong?
Basically the impetus was because they closed our plant. They closed engineering first, and then eventually the entire plant later. They offered me a job in Asheville, and I looked at that and decided it was going to be a lot of work. It was going to be a “difficult row to hoe”. My response to my wife when I came home was that it would be easier to start over than to pick up the family, move, and try to work there. And she said, “Let’s do that”. I always had the bug to start a business. I think everybody does, and I mostly blame my MBA, it puts crazy thoughts in your mind.
Did you start with others or by yourself?
Well there was a few of us talking about it, and there was an opportunity to buy one business. It was a small business, but that fell through, and then it came down to it was just me left standing. And so, I just wanted to do it. I could see an opportunity, and I went after it. It wasn’t a big one, but it was enough to get started. There were two of us, me and a draftsman, and we started in the basement.
Were you close friends before you started?
No, I wouldn’t say we were close friends. But, we had worked together quite a bit and trusted each other. We knew what each other’s capabilities were. I was surprised he was willing to do it. I said, “Show up at my basement, and we’ll start a company”.
When you started, did you have issues deciding who was going to do what? It sounds like your both technical people, so did you step on each other’s toes?
No, because I was paying the bills, and he wasn’t a part owner. He was an employee.
OK, so you had the full equity stake?
Correct. He was very willing to do whatever it took for us to be successful. He was very open to that, and it worked well.
What were some of the challenges you faced when you started your company?
Everything! The first thing was to get our first contract, our first job. We had to find a customer who was willing to take a risk on us. And ironically, the customer was back with the company we had left. There was a project from a group in Illinois. They needed a little product made, and we said, “We can do that”. It was pretty risky on our part. We were trying to negotiate a contract to build this thing, and what it is. And basically said, “We are going to start doing this!”. I took the risk on my dime, and designed it. As we were negotiating this contract of what it could do, and what it needs to be over several months, I believe we started in April, and it was now August, we came in with a complete design and showed it to them. Here’s a picture of it, here’s what it does, but we need to sign a contract if we’re going to go further. They got comfortable with us, knew our history, but getting that contract was probably the most difficult thing, and risky.
That sounds fast, for doing the complete design. Although I don’t know how evolved it was.
It could be really fast because that’s the only thing the company had to do. We had no other things to worry about. That was the only thing we did. We focused on it and got it done.
Were you able to use a lot your contacts and sources developed from your previous employer, such as machine shops?
Yes, everything local. We were able to utilize resources within driving range. It wasn’t too complicated of a product for us. It was a pretty low risk on the design side because it wasn’t complicated product. It was a nice match for us, and lucky opportunity really. We had to prove ourselves. But you do what say, and say what you do, and if things don’t line up you explain why. You have to build that trust, and it takes work.
On your website, I noticed you have a network of people who will perform maintenance on equipment.
Yes, for repair work. Those are people out there, who are familiar with our industry. We add and subtract from that list as we go along.
Was that network hard to establish, or was it already established and you became a member of the network?
No we just contacted those people. You can find them on the internet, or they come recommended to us. For example, you talk to someone from college and ask, “Who’s a good repairman for your area?”. It’s just networking around and finding out who’s the best for that area. Some we worked with before, and where we had holes in an area, we would work to fill that.
On the website map, it looks like you have pretty comprehensive coverage of the US.
Yes, luckily we don’t have to use them!
If I understand correctly, LabStrong offers design services to OEMs?
Yes, our first product was an OEM. That basically got us started. We got into the manufacturing side for that product too. Even after we had it designed we had to prove to them that we could manufacture it.
So do you only take on an OEM project, if you can manufacture it?
No, not necessarily. We went from designing it to setting up to manufacturing it. It wasn’t very big volumes, so it wasn’t a big deal. Still, it’s a big deal to start, and have one believe that you can design and manufacture it with top notch quality. After that we got into some similar design work, some for ourselves, and some for other good quality companies. And again, we had to prove ourselves. We also had some references we could use. We would show them a picture of the direction we were going, and then we had to prove it to them. We had to deliver part of the product design before we even got started. We had to go a little further than halfway.
Is engineering design services a substantial part of your business?
No, I use it as a balance for cash flow. Our business is very top heavy. There is a lot of overhead here with our engineering. We have a lot of engineering talent here because that’s what I know and that’s what I’m comfortable with. And, we can do it. We hire out, and then we will do something for ourselves. We hire out, and then we will do something for ourselves, and that keeps a balance of starting up our own brand, and yet at the same time we can work for somebody else and they can pay us. That keeps a nice cash flow model going.
As you’ve grown your company, how do you go about selecting people to join your company?
Everything is difficult, but that’s difficult because you want to find someone who is not afraid of being in an entrepreneurial environment. We wear a lot of hats. There are only so many of us here, so we all do many tasks, and we back up someone else. You have to have people who enjoy a variety of tasks. If they like to have a set of mundane things to do every day, a narrow focus, and a narrow delivery, they wouldn’t fit. They need to like variety in their life, learning broad things. You don’t know what fire you’re going to see each day to a certain extent.
As you’ve grown your company, have you brought on people to manage different areas of your business?
Yes, that’s one of the nice things as you get bigger, you can hire people to do tasks you’re not good at. That’s the big thing to find out, “What am I good at, what do I suck at?” Then that’s the person to find, and developing that position around those needs. It’s hard to find the right person and someone who is interested, because it has to be a really good match. If you hire somebody and it doesn’t work, you start over, but that really hurts.
How are things going with LabStrong right now? Are you expanding, staying the same?
I guess we’re doing the turtle, slow and steady, wins the race. We want to grow in a controlled fashion. We want to do everything with intent and do it well. We don’t want to buy some other company and grow quickly. We are at an age now, after being in business so many years, where we could go out and get capital. We get calls from equity people who are thinking, “They are still around, so they must be doing OK, if they’re still alive”. They want to start talking, and you could do that. An equity person could get involved, throw you cash, and get so much ownership. You could grow quickly if you have a plan for that. But that’s not our intent, we don’t want to diversify, get a big loan, or leverage the company for quick growth. You tend to make poor decisions that way, or I should say it can lead to poor decisions. There’s a risk of that because your equity partner wants out in so many years, a buyout plan, or sell the company. Your bank needs their money too, and if things start going bad, you have to make your payment. Then you have to cut costs, or grow crazy sales somehow.
So you want to grow slow and steady with a minimum of debt?
Yes, limit the leverage to reasonable amounts, and again, no looking for equity, because there’s not that many real “angel” investors out there I’ve came across.
Have you ever struggled with the dichotomy of growing the company quickly to obtain a lot wealth versus maintaining control?
If I’m going to invest my life, and risk my family’s future and everything else on it, I want to do it on my terms. I want to be able to maintain that control, and keep the trajectory safe and dependable. I think it removes some of the opportunity for conflict as well. I have heard from so many people warning about don’t bring in a partner, because it just doesn’t go well eventually. Even if it goes well for a while, eventually there are two people who will want to go two different ways and one company. If it splits, it’s ugly kind of like a divorce. I just don’t want to be in that position, or put the people here in that position.
With your company have you had to change your approach to rewards and motivation, versus your previous experience working for a large company?
It’s the whole package. It’s our work environment, compensation package, and the opportunities we offer versus others somewhere else. It is a unique environment.
When we interview, I tell folks regarding our work environment, we have two rules. If we get that right, we don’t have to worry about anything else. It’s kind of odd, maybe a little shocking.
The first rule is; Love the Lord your God with all your heart, mind, soul, and strength. People say, “You can’t say that in a business!” This is how we use that rule every day in the business. Everything we do is to a higher authority. In other words, I as a person, owner, worker, can justify a lot of things. I can justify “I did this, so I deserve this.” Or, “I didn’t get this, so I am going to get them for that.” So my moral character and behavior is at a higher plane than our human existence. We can have a vote here, and we’ll all vote for what is best for us, not for somebody else. So our moral standing is at the highest level it can be. Our moral goal is higher than just a majority vote or anything like that. We hold ourselves to the highest moral standing we can possibly attain, and it’s outside of ourselves.
Is that how you vet your decisions? Asking, “Would God approve of this?”
Yes, I hold myself as an owner, as a co-worker, as a customer, as a supplier to that Authority. If I can say at the end of the day, I think that God would be pleased with what we did today, how we interacted with everybody, suppliers, vendors, customers, everybody inside the building, everybody outside the building, then I’m fine and we’re doing it right. I’m not doing to be pragmatic. I’m not doing it to make a political point. I’m doing it for the highest authority that exists. I feel like, there are a lot of things, that businesses have done, that they can’t justify doing for different situations and scenarios. So that’s what I’ve set for a guideline.
The second rule is: Love your neighbor as yourself. How that applies to the business, I’m going to treat everybody I come into contact with the same way I want to be treated. I am going to treat a co-worker, a vendor, a customer, another business we work with, the way I want to be treated. And that means when I demand payment within thirty days, I have to be paying my suppliers within thirty days. Whatever policy it is, it has to be a policy that I demand for myself. Whether it be benefits, how we handle a customer who has a complaint on the phone, we are going to try to take care of it to the best of our ability.
If we get those two things right, all the rest of the rules and regulations in the employee handbook, that doesn’t matter anymore.
I think that’s admirable. You’re demonstrating your faith in your working life. A lot of people compartmentalize that.
Right, and it’s such a taboo thing, which is too bad. For me personally, it’s who I am. The business should be a person too, and I think what better person could you be? There are all kinds of political stuff, you’re for this, you’re against that, but that’s not what it’s about in my opinion. If your intent is to treat others as you want to be treated, and that includes confrontation, then it’s going to be fine. It won’t mean that everybody gets what they want. It doesn’t mean there won’t be conflict, or hurt feelings. But they know if something goes wrong, we’ll all be there for them. We had a company whose plant burned down, and they couldn’t supply us. Are we going to help them, or beat them over the head because they have a contract to fulfill? Hopefully, that attracts the same type of customer for us.
When you share those rules with others, did you find people are shocked or surprised?
Oh yeah. When we are doing interviews, they get a shocked look, “You can’t say that!” I tell them, I don’t know if I can or can’t, but in reality that’s what it is. But until the government comes and tells me that I don’t have the opportunity to do that, I’ll continue on.
Is your company a ministry of sorts?
No, I wouldn’t say that. That’s not the company’s purpose. If we’re living that out, it should show, and it’s important for us. Individually we should have that, and I encourage people to do so. I believe as people, we’re like a three legged stool; physical, mental, and spiritual. And you have to have all three legs of that stool solid. If you only have two of those, it’s an imbalanced thing. As a general discussion, society only talks about two. That third leg is like the third rail of the subway, “You don’t want to touch that one.” I think it’s too bad, because it creates an unstable environment for people. Everyone here has to have a stable life, in order to deal with the stress here, and then to go home and deal with the stress there. We’re doing a disservice to the employees and the people around us, if we don’t acknowledge the importance of those three areas. So we have our policies acknowledge all three areas. That’s part of what the company is, the values we bring. Do you want to come here and work in that environment? There’s a value in that, but when you come to work here, there will be stress and strife, but you should feel we’re all pulling for each other. You shouldn’t feel all alone, abandoned on an island. We should all be serving each other. Again, there’s a value to that, that attracts certain people.
The other side is financial, and I’m up front with them. We’re not going to pay top dollar. We’ll pay well and close to top dollar. There are other places that pay top dollar, and demand top output with fifty hour weeks. My opinion here is, I only want you here for forty hours. We may end up with more, some weeks, but you need a balanced life. But the forty hours you’re here, we want your peak performance. For example, I’m more of an evening person. Other people are morning persons. We have a production person here at six in the morning, she works straight through lunch, and is gone by two in the afternoon. That’s great. When does it work best for you? It also allows the phones to be answered over a wider spread. We trust each other, and it’s more of a family environment here than a competition.
Our benefits for compensation are not excessive, but we try to keep them important. And the most important ones, do them well. Not have a lot of them, because after a while it just gets confusing. Some people value them, some people don’t. Money and health, that’s what most people care about.
With your rules in mind, how is your leadership style different from others?
It’s more of a soft approach. I have to repeat to myself and to others, I don’t care if you make mistakes. We just care if you make them twice. We expect mistakes. We want a bunch of mistakes made early and often. That’s to get ourselves past, ”I’m afraid to make a decision. I might make the wrong one.” Everybody here has a good head on their shoulders and they can trust that. I trust it. When we make a mistake, we don’t want to fear that, or hide that. We want to acknowledge it and say, “How can we do that better?” We want the mistake to rise up to the surface and not be hidden. If it’s hidden, then we have an environment where more energy is spent covering their butt, not going forward and being aggressive. I’d rather have people moving forward and being aggressive, making some mistakes.
Have you had to work hard to develop a culture like that, or did it just evolve naturally?
It depends on your personality. There are some who are meticulous. Engineers tend to be that way, and we’re afraid to make mistakes. It keeps coming up. I’ll respond here’s my feeling, but it’s a feeling, you’re closer to the problem. I’ll tell them, “You’re going to have to make a decision, and I’ll back you up on it. If it’s wrong, fix it, and do it quick.” I’ll give them my input, but I won’t tell them what to do. Sometimes you have to, if it’s way out of their comfort zone. They are closer to the problem, and are our expert here for this, so we need to move and go.
Mark, with your rules and your leadership style, you sound very wise.
Well I appreciate that. I wanted to be in this area, but I never imagined getting there. Some of it is from looking back at my own history, work experiences, and keeping notes. What worked well, what didn’t. A lot of it is growing up from doing it over the last seven and a half years. I also talked to other guys too, reading the books, figuring out what you believe in, and what you think is baloney.
Do you meet on a regular basis with other local business owners?
There are a couple of guys I do meet up with. I was on a flight once with my wife, coming back from somewhere, I can’t remember. The guy and his wife across the aisle from me, was like looking at a mirror, they were doing the about the same things we were, except they were older. He then pulled out a Bible and was reading it. As we were about to disembark I came out of my shell and asked him, “What is it that you do?” He was the west coast VP for Walgreens, everything west of the Mississippi. I told him I had just started a business, and was trying to get it going, and do it in a manner that was pleasing to God. Would you be willing to talk sometime? He responded that he’s love to, so we set up a weekly call. That was very valuable as a coach for me, but he was in the process of fighting cancer. He ended up passing away last year. He was pretty rough the last year, so we didn’t talk much then, so I talked to him over the course of two, three years. It was very generous of him to give me a half hour to an hour each week. He was very valuable. He was a weathered guy in business, and just very honest about stuff. These are the things you need to do. These are the things you have to confront. You can’t allow this to happen. It was very valuable for me to have that weathered businessman approach. He had corporate experience, and so he was interested to know what it was like to be this little entrepreneur. About as much as I was curious as to what it was like to be a VP of a corporation.
Mark, I’m very appreciative of you to take time out of your busy schedule to talk. Thank you.
Sure. I have to pay it back too. I’m the benefit of a lot of guys. I have asked a lot of guys who were in business. My father-in-law had a business. My parents had a small insurance business. I know this all (the MBA classes) will put a lot of crazy ideas in your mind, so be ready for it.
