November 1, 2014

Back to Basic

Todd Fogel, owner of Basic Metals Inc., on building lasting relationships and clear communications

There’s more to the first half of Basic Metals Inc.’s name than you might expect. The Germantown, Wisconsin-based aluminum service center derives its appellation from a clever acronym cooked up by owner Todd Fogel’s father. “When my dad came up with the name Basic, it actually was meant to stand for brass, aluminum, stainless, iron and copper,” Fogel says. “He had some dreams of being a full-service distributor and offering all different metals. But all these years we’ve only focused on aluminum. Maybe someday we’ll expand to other metals.”

But the aluminum business has been good to Fogel. He joined his father in 1983 as the third employee at Basic Metals, which had been incorporated in 1980. In 1985, he and his father became owners. In 1999, Fogel purchased it from his father to become Basic Metals’ sole owner. Since then, the company has expanded to 27 employees, and from 6,000 square feet of space to 80,000, with warehouses in Phoenix and Memphis.

Yet for Fogel, a reassuring constancy has been one hallmark of his business. Basic Metals has been largely unaffected by the industry’s consolidation. Despite the recession, it hung on to many of its customers. His competitors, Fogel says, are the same familiar faces. Fogel talked with Forward about building lasting relationships with customers and employees, and why he finds the metals industry so rewarding.

How has Basic Metals evolved since 1983? 
When I joined, it was my father, a slitter operator and myself. I would say I was kind of a jack-of-all-trades. I was the inside salesperson, bookkeeper, fork truck driver, slitter helper, janitor. I would load the trucks and whatever else needed to be done. My dad was pretty much our salesman.

Today, we’re still a small company. But I remember getting excited the first time we got a programmable typewriter back in the mid-’80s. And I thought, “Wow, I don’t have to type in all these addresses every time I fill out an order now.” And obviously today the technology is tremendous. I also remember the day that—and this will date me a little bit—a friend of mine from high school came in, tried selling me a fax machine, and I said, “We’ll never use that in this industry.” [Laughs] And we don’t use faxes anymore, so I guess it’s gone full circle.

So the technology has changed, but the relationships haven’t. A lot of my customers I’ve been dealing with my entire career. And I developed a lot of relationships with different customers, personal and professional. And I guess that’s why we’ve been successful and why we’re still in business today and doing pretty well.

    “It’s still about knocking on doors and meeting people face to face.”

Has the competitive landscape changed a lot?
Not really. It’s the same faces. It’s different names, with the mergers and acquisitions, but we see the same players all the time. The ownership of the companies has changed, but for the most part, it’s kind of a fraternal organization, this whole industry.

But do you feel pressure in light of all the mergers and acquisitions?
The thing about a company like Reliance is that when they do buy my competitors—and they bought a couple of companies nearby, and a lot of my competition—they leave them alone. So really, we don’t see any more pressure. Here in the Midwest at least, like I said, it’s just different ownership. Probably one of the only new competitors we’ve had in the last five years is Main Steel, an Elk Grove, Illinois-based steel service center that deals in stainless, aluminum and carbon steel, when it went from just doing toll processing to becoming a distributor and selling metal. We don’t run into them too often in aluminum.

What about technological changes?
There’s more electronic interchange in processing orders, getting paid, and receiving orders and releases from customers. But the programs we use for that are specific to each customer in most cases—we use whatever platform they need. I’ve always considered Basic Metals sort of a job shop. Whether we’re processing aluminum, selling aluminum or processing steel for somebody, we don’t want to have any one particular way of doing anything. I’ve always said we rely on our customers to tell us what they want, and we try to respond to their needs.

Your website boasts quality and timeliness. What factors go into ensuring both?
It’s our ability to communicate as a smaller company. Internally, we have a great system worked out. We have a production meeting every morning, and that includes everybody—our plant manager, our production controller, our sales team, myself, my CFO. It’s easy for us to get together in a group of six or eight people, and we go through all the orders we have and go through our trucking schedule to make sure we’re getting everything out on time. Our business is small enough and flexible enough that we can make changes on the fly. It gets a little frustrating sometimes for my plant manager and the guys out in my shop, because things will change, even throughout the day. But I guess that’s my sales pitch to new customers: We have the flexibility to make almost instantaneous changes.           

It’s the same with the quality issue. We don’t have any pre-existing quality standards here. We rely on getting that information from our customers and making sure that when we take an order from a new customer, we get all the specs and ask a lot of questions. And then we try to just live up to expectations.

I’ve always lived by the motto: Tell people what we can do, and make sure we do what we tell them we can do. And I think that’s why we’ve been successful in business. We know we can’t do everything for everybody, but what we do do, I think we’re good at.

What do you see as the future of the company? Do you see growth?

Right now we have a lot of opportunity for growth. Our customer base is extremely broad. We sell to industries such as housewares, construction, appliance, electrical, stamping houses and fabricators. Our growth strategy has always been to reinvest our profits into equipment and inventory. After 2008, we decided to hold off on any capital expenditures. But we’re probably getting ready now to look at expanding. Our circle and sheet business is currently growing the fastest, and now we’re looking at new equipment to improve both our capacity and quality of both, as well as our slit coil. We’re very much a niche player—we know our core business is flat-rolled aluminum. But in the future, we might have opportunities to get into maybe heavier gauge aluminum, maybe extrusions.

What role do you think your son will play? Will he eventually take over?
He just started with us in April of this year. I told him when he graduated from college that he was welcome to come aboard when he was ready, but not until he did something else for two years. So when he got out of school two years ago, he found another job and worked selling insurance. I shouldn’t say sell insurance—he always yells at me when I say that. [Laughs] He was a financial adviser.

A lot of people I’ve talked to in old, family-run businesses all recommend making your children go out and make a name for themselves. So I wanted to make sure he could bring something to the company as well, something that gives it new energy.

But right now, I haven’t put a lot of thought into my exit strategy. I did a little homework this morning to prepare for this interview, and found out that the average age of employees in my office right now is 43. [Nationally, the average age of a high-skilled manufacturing worker is 56.] And that includes my son, our youngest employee, who’s 23. I’m our second-oldest employee at 54. Other than my CFO, I’m the old man around here. I also found that the average tenure in my office is 16 years. If I take my son out of the equation, the average is 19 years.

Why do you think that people stick around so long?
I’d like to think it’s because of me, but…[laughs] I don’t know. I think we have some great compensation plans here. We’ve had a very lucrative profit-sharing program in place since day one. Since 1985, we have always contributed 15% of each employee’s income into a profit-sharing plan. I like to think they stay because they’re happy and enjoy working here.

I would think that after so many years, people become more like family than anything else.
Yeah. I’ve been to almost every one of their weddings. I’ve been around when most of their kids were born. There’s a cohesive culture, I guess. Interestingly, I’ve found we’re more successful bringing in people who don’t have industry experience.

“There are so many good people in this industry, on all sides—vendors, customers, even competitors.”

Why do you think that is?
Our culture here is unique. If people come in used to doing things the way they were doing them at their former metal service center, it doesn’t always match how we do things here. And it’s hard to get them into our mindset.

More and more metals and manufacturing companies are using social media to form relationships with potential buyers. (See “Service Centers Get Social.”) Is there a reason you don’t have a Facebook page for Basic Metals?
I think we’re an old industry. It’s still about knocking on doors and meeting people face to face. I come from the old school that way, and have my salespeople out there and talking to people in person, or even on the phone versus Facebook. Even though we do a lot of electronic communication now, I still think we want that personal contact. I’m more concerned about the company’s website. I think people are going to Google us more than they’re going to look on Facebook for us. We actually just hired somebody to redo our website. Right now, we don’t spend any money on search engine optimization to get our site to rank first in Google search, though it does.

We’re talking about taking orders through the new website. But when we get new orders, we ask a lot of questions, so I would not be comfortable taking orders off the Internet without actually talking to a customer. In our industry there are so many specifications. Obviously the aluminum itself, and the size and the tolerances. But then there’s the skid, how they want it packaged.

New aluminum alloys are emerging that could remake the industry. (See “Aluminum Steps Up.”) How are these affecting your business? Do you change your processes to accommodate increasing demand for them?
It won’t affect our processes at all. We just do aluminum, so we don’t have to worry about contaminations or anything in our lines. And we’re not a first-tier supplier at all to the automotive industry. Maybe some of our fab shops are doing a little bit of work for automotive, but we don’t deal directly with it. If this F-150 Ford pickup truck takes off, I think automotive is going to affect the demand for aluminum a lot.

 “That’s my sales pitch to new customers: We  have the flexibility to make almost instantaneous changes.”

In something of a departure from metals, you own a bar in Milwaukee. How is that similar to running a metals business?
There are no similarities. [Laughs] It’s probably more work and less gratifying than the metals business. A lot more headaches. You know, the metals industry has been a good industry. It’s not sexy like the bar industry, but I’ve found it very rewarding over the years. I’ve met a lot of people, met a lot of friends. There are so many good people in this industry, on all sides—vendors, customers, even competitors.

I enjoy the metals business and I enjoy our size. We really cater to our customer—I always tell my customers, the buck stops with me. There’s no stockholders to report to, nobody up the ladder. If there’s an issue, if there’s a problem, it comes to my desk, and that’s it. I’ve been doing it a long time, and I’ve enjoyed it. It’s one of those things: Once it gets in your blood, it sticks with you.

Kelly Caldwell, a Chicago-based writer and editor, is managing editor of Forward.

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