David Solomon built and ran a $100 million toy manufacturing company in the 1990s with 840,000 square feet of facilities in Montreal and Plattsburgh, New York, successfully competing against China at a time when conventional wisdom said it couldn't be done. Today, as founder of SERO Growth, he helps manufacturers expand into international markets and supports international organizations entering North America.
In this episode, David challenges the myth that US manufacturing can't compete globally. He shares his "just-in-time" manufacturing approach that eliminated warehousing costs, explains why unit cost is only part of the equation, and reveals how his company achieved 40-45% gross margins while competitors struggled. David also breaks down the hidden costs of offshoring - from supply chain disruptions to cash flow tied up in goods on the water - and offers practical advice for manufacturers looking to enter new markets, including why starting small beats going big.
Want to learn more about David Solomon's work? Check out their website at https://www.serogrowth.com/.
Connect with David Solomon on LinkedIn at https://www.linkedin.com/in/davidsolomon13/.
Key Points & Timestamps
- 00:00:51 - David Solomon introduced: founder of SERO Growth, nearly 35 years of international market expansion experience
- 00:01:32 - Craig's semiconductor story: how internal tax policies made reshoring harder than it should be
- 00:04:19 - David's manufacturing story: $100M company with 840,000 sq ft in Montreal, competing with China in the 1990s
- 00:05:50 - The bankruptcy lesson: new administration moved everything to China, company failed within months
- 00:06:10 - Hidden costs of offshoring: warehousing, repackaging, cash flow tied up in containers
- 00:07:30 - Supply chain disruptions: COVID, port strikes, Red Sea issues - risks you don't have with local manufacturing
- 00:08:12 - Why price isn't the primary buying decision: understanding what makes customers actually buy from you
- 00:12:08 - The automation reality: capital investment beats labor cost advantages when you factor in total cost
- 00:18:58 - Entering Canada: bilingual packaging requirements and why Target lost $3.5 billion
- 00:25:28 - Trade deficits explained: why recycling money internally eventually leads to zero
- 00:31:19 - First steps for manufacturers: start small, find markets the size of US states, learn the export game
- 00:39:56 - How to reach David: LinkedIn (David Solomon 13), serogrowth.com, or info@serogrowth.com
Transcript
[00:00:05 - 00:00:30]
Craig Andrews
I was in a coma for six weeks while the doctors told my wife I was going to die. When I woke up, she told me the most fantastic story. My team kept running the business without me. Freelancers reached out to my team and said, we will do whatever it takes. As long as Craig's in the hospital. I consider that the greatest accomplishment in my career.
[00:00:30 - 00:00:51]
Craig Andrews
My name is Craig Andrews and this is the Leaders and Legacies podcast where we talk to leaders creating an impact beyond themselves. At the end of today's interview, I'll tell you how you can be the next leader featured on this show.
[00:00:51 - 00:01:10]
Craig Andrews
Today I want to welcome David Solomon. He is the founder of SERO Growth. He helps manufacturers expand in the untapped international markets and supports international organizations entering the North American markets. He brings nearly 35 years of experience and has led
[00:01:10 - 00:01:20]
Craig Andrews
and executed international marked market expansion initiatives across manufacturing, advertising and technology services.
[00:01:20 - 00:01:32]
Craig Andrews
I'm excited to talk about this because one of my passions is I would love to see manufacturing become bigger in the U.S. I didn't say it when I say return, but maybe some of what we've lost return.
[00:01:32 - 00:01:37]
Craig Andrews
And David's one of those folks that studies us regularly. David, welcome.
[00:01:37 - 00:01:38]
David Solomon
Thank you Craig. Good to be.
[00:01:38 - 00:01:41]
Craig Andrews
Here. So let's give some context.
[00:01:41 - 00:01:46]
Craig Andrews
The I mean, we met in success champions networking and,
[00:01:46 - 00:01:59]
Craig Andrews
which is neat. I've had a number of guests from that. Come on. So, hey, folks out there trying to get on the podcast, join us again. It's a it's a. It's a good way to get in to,
[00:01:59 - 00:02:01]
Craig Andrews
get in on the podcast, but,
[00:02:02 - 00:02:04]
Craig Andrews
you know, you and I, we've talked, what, 3 or 4 times.
[00:02:04 - 00:02:07]
Craig Andrews
Yeah. It's just been,
[00:02:07 - 00:02:09]
Craig Andrews
It's been delightful.
[00:02:09 - 00:02:23]
Craig Andrews
You said something in the green room that really stood out, and let me let me kind of set the stage for that from one of my experiences. Well, not long after I moved to Austin, I moved,
[00:02:23 - 00:02:27]
Craig Andrews
I moved here, and I inherited a product that had a screwed up cost model.
[00:02:27 - 00:02:46]
Craig Andrews
And it was a it was actually a commodity. It was a semiconductor for mobile phones, which enormous cost pressure on those. And they would tell me every month in the monthly reviews you need to improve the margins. I said, well, we have to take cost out. And they said, they can't be done. You need to raise prices. I'm like, yeah, this ain't the market where you get these prices.
[00:02:46 - 00:02:47]
David Solomon
Yeah.
[00:02:48 - 00:02:54]
Craig Andrews
And finally I was like, look, you guys can either beat me up over the margins.
[00:02:54 - 00:03:17]
Craig Andrews
You're welcome to do that. But you can't tie my hands and not let me work on the price. And so finally, I got permission to release our assembly spec to somebody I'd worked with previously in Colorado, who? We had a ceramic substrate, and it was a little bit of specialized handling, and these guys quoted it assembly for half of what we were paying in Asia.
[00:03:17 - 00:03:38]
Craig Andrews
And that got their attention and they said okay, go down the basement where we keep the numbers. Guys have them run it through the cost models. And I go down there and they tell me, they say oh we need to raise your tax rate to 35%. Like what they said, you're being taxed in Singapore for this product, which is 5%.
[00:03:39 - 00:04:02]
Craig Andrews
But since it's coming to the US for assembly, we we have to tax it 35%. I'm like, this product will never be sold in the US. It only works in frequency bands that are in Europe and Asia. And they're like, that's the way it was. And that always to this day, that that breaks my heart because I, I looked at that, I was like, we just made it harder for American manufacturers.
[00:04:02 - 00:04:16]
Craig Andrews
We just took away American jobs. I was about to, you know, give them business. And it just for me, it kind of busted the myth that you can't manufacturer,
[00:04:16 - 00:04:19]
Craig Andrews
effectively in the US.
[00:04:19 - 00:04:23]
David Solomon
Greg, that's a story I heard, so I, I was in the toy business in the 1990s.
[00:04:23 - 00:04:24]
David Solomon
840,000ft² in,
[00:04:24 - 00:04:34]
David Solomon
Canada. Montreal. Another 100,000ft² just on the other side of the US border in a little town called Plattsburgh, New York. For those of you don't know that was an old Air Force, US Air Force base,
[00:04:34 - 00:04:36]
David Solomon
border community, great place.
[00:04:36 - 00:05:01]
David Solomon
And we had 30 injection molding machines, large printing press. We manufactured 70% of our own components. We assembled on a just-in-time basis. We were highly profitable. $100 million company, highly profitable. We busted the myths in the 90s that you can compete with China, you can compete with other markets. You just have to be smart about it. A little more automation.
[00:05:01 - 00:05:25]
David Solomon
This is the 90s right. So we're not talking about robots a little more automation a little more savoir faire. But the beauty was I didn't have to we didn't have my container loads to bring to Canada to store it, warehousing, unpack it, reshape it. That's all those costs that people don't factor in because we built everything just in time and whatever went to the US, we assembled on the other side of the border and we shipped it to our American clients.
[00:05:25 - 00:05:50]
David Solomon
Everybody was super happy. We were competing with China. Wow. When we were bought out in the late 90s, new administration walks and says, this is dumb, we're going to do this all in China. Finished product brought in from China. We're bankrupt in a few months. They didn't understand the they looked at the unit, cost a production, but they didn't follow the rest of the chain.
[00:05:50 - 00:06:10]
David Solomon
Okay. What happens when and what do we have to do in this that the handling the this the that we lost money we had to liquidate goods. We had to it was just the, the how could you forecast. Perfect. Right. So what the beauty of made in the USA today if we go back to that is that. Yeah.
[00:06:10 - 00:06:31]
David Solomon
Your unit cost might be slightly higher than what you manufacture in China or India or wherever it is that you're going to manufacture, but you're missing the rest of the of the chain of handling it when it comes in repackaging it. Re this, re that. And now you have to part of me a lot of cash to bring in those containers.
[00:06:31 - 00:06:52]
David Solomon
Look at the stress you put on the business versus manufacture in-house. Assemble when needed. Ship when needed. When you take all that into consideration. We compete very well on a global scale. And Craig and I think we've lost that because we are not calculating the entirety of the of the supply chain and, and then of, of the sale.
[00:06:52 - 00:06:54]
David Solomon
I that's my belief.
[00:06:54 - 00:06:59]
David Solomon
And I have you had I haven't had too many people who've been able to contradict my, my theory.
[00:06:59 - 00:07:04]
Craig Andrews
Well, going back to my assembly years later, I ran to the sales guy,
[00:07:04 - 00:07:20]
Craig Andrews
their account, and I said, all right, you can tell me now, where are you guys buying the business? He said, no, we had all of our margin goals. They hit all their margin goals and came in with a quote that was half what we were paying in Asia.
[00:07:20 - 00:07:23]
David Solomon
Yeah, yeah.
[00:07:23 - 00:07:40]
Craig Andrews
And you know, the the other thing is the number I've always heard is if you see a change in demand, you plan your order. It's three months from China to the US. It's a whole calendar quarter.
[00:07:40 - 00:08:05]
David Solomon
And what happens if, as we've seen now, there's a disruption, you know, you're still committed. It's goods on the water. If it makes it here now, what are you going to do with it? What happens when the client cancels the order or postpones the order because of a disruption? Yeah. When you make in U.S., you control better your inventory and your supply chain.
[00:08:06 - 00:08:12]
David Solomon
You control better all of that. That is a major advantage.
[00:08:12 - 00:08:25]
Craig Andrews
You know, and I didn't think about that when you just said that hit me. I was like, if I'm if I'm selling to Europe and I'm manufacturing in China, I'm probably going through the Straits of Hormuz right here, not Straits of Hormuz. But they should have read the,
[00:08:25 - 00:08:26]
Craig Andrews
Red sea.
[00:08:26 - 00:08:56]
David Solomon
Red sea, Which is in, in if, if, if we're looking at geopolitics the way it is today and the volatility out there, you run the risk. But it's Craig. It's not just now with the war since 2008. Look how many disruptions we've had. Whether it's economic or whether it's Covid or whether it's something else. You you basically you give the control of your manufacturing process to, to somebody else and you're at their mercy, good and bad.
[00:08:56 - 00:09:19]
David Solomon
If you're controlling it. And you could there's so much more you could do with it. You know what I think that would well, if you're a commodity product, I understand the price war. But most American manufacturing is not commodity. There is an there's an advantage. There is there's something positive in there, something unique in there that you would want.
[00:09:19 - 00:09:33]
David Solomon
And you're willing to pay a slight premium or a premium for that. That's worth that is definitely worth made in USA. And I'm a Canadian and I'm saying I would say the same thing to Canadian manufacturers.
[00:09:33 - 00:09:59]
Craig Andrews
Yeah. And I think I think as long as you have quality, I mean that that helps improve. You know, it's like back in the 19, you know, late 80s, early 90s. Yeah. Buy a Japanese car because of its quality. If you have a reputation for quality and if you can build that and your manufacturing in the US, in the US can make sure and I think we're doing a lot better on the quality front than we used to.
[00:09:59 - 00:10:21]
Craig Andrews
Not that there's not room for improvements, but that people will pay. I mean, it's matter of fact that hear me as there's a presentation I give and in one part of the presentation, you know, it's it's about how people try to fix sales problems with price and which shortcut don't try and fix the sales problem with price.
[00:10:21 - 00:10:39]
Craig Andrews
It doesn't work. That's not the solution. It's that's kind of the point of the presentation. But I go through and I cite multiple sources that ask people what their primary consideration was, and doesn't matter if it's B2B or if it's B2C. Price is not the first consideration.
[00:10:39 - 00:11:01]
David Solomon
I have told that. So in my role when I work with manufacturers and they have never exported, that's the first conversation we have. What makes you unique? Why do your clients buy from you currently? And if you tell me it's price and you're not supposed to be a commodity, then you don't have the right answer. And I make them go back to their clients and say, so why are you buying from us?
[00:11:01 - 00:11:21]
David Solomon
And it sounds stupid, but I've actually said the business owner, not the head of sales, the business owner. Go talk to your clients, your best ten clients. I'll go with you if you want and I'll ask the question as your consultant. But I want to know why they're buying you. What problem have you solved for them? And it more than likely it's not a price answer.
[00:11:21 - 00:11:35]
David Solomon
And that when you go to export is what you take. That's the message. Because today unit cost whatever we're going to do you're going to struggle on a price list between you, India, China, Bangladesh, Vietnam, Malaysia, whatever they're
[00:11:35 - 00:11:43]
David Solomon
manufacturing. But if you're saying first thing, this is what makes us great, this is why our clients in this market buys us.
[00:11:43 - 00:11:56]
David Solomon
Here's why you should be buying from us. Then price becomes secondary or tertiary and now you have an advantage. If you only come in with price, you lose. You're going to lose.
[00:11:56 - 00:12:02]
Craig Andrews
And you know, I just think there's this broad perspective. There's this belief, at least in the United States, that,
[00:12:02 - 00:12:08]
Craig Andrews
we can't afford to manufacture. We can't be competitive in manufacturing. What do you think drives that belief?
[00:12:08 - 00:12:30]
David Solomon
Well, there's a perception of our labor costs speak too high. Look what we're seeing right now. Forcibly in. If I'm not mistaken, it's Los Angeles, I believe. Now they're pushing hotels with $30 an hour minimum wage. When you create that kind of, you know, environment where you're forcing higher minimum wage prices, your perception is we can't compete with Mexico.
[00:12:30 - 00:12:55]
David Solomon
We can't compete with China, because look at their labor costs. It's negligible. What we're failing to recognize in North America is today. Yes, it's a capital expenditure. It's a significant investment in equipment. But then you could create the product that you want. You with automation now, today you can actually compete at the end of the day. But companies don't want to invest in Cap capital expenditures.
[00:12:55 - 00:13:17]
David Solomon
They don't want to invest in more people for quality control. They don't want to invest in that. They want to let someone else do that. That means you have given up your manufacturing capacity and quality and control. When we did it in the 90s, people were marveled and they said, oh, I couldn't buy 30 injection molding machines. Listen, we didn't buy brand new machines.
[00:13:17 - 00:13:43]
David Solomon
Great. We bought them in auctions. We were we were creative in the way we purchased things and we but the investment in the long run paid off supremely well. We were able to sell product at a higher margin. We were able to customize our products. We did. We did private labeling for target. At the time. We did all kinds of things and they said, You Canadians, how do you compete with China?
[00:13:43 - 00:13:53]
David Solomon
Because we have the equipment, we have the people, we have the talent. We brought it all under one roof. Same thing. It happened today in the US. Find your niche.
[00:13:53 - 00:13:57]
Craig Andrews
So just a little thing I'm curious about is injection molding. So,
[00:13:57 - 00:14:01]
Craig Andrews
in the 90s I was designing cell phones for Ericsson. Yeah,
[00:14:01 - 00:14:04]
Craig Andrews
nice. And,
[00:14:04 - 00:14:05]
Craig Andrews
a tool,
[00:14:06 - 00:14:17]
Craig Andrews
an injection mold air tool for our plastics. We cost us 200 grand. And those days, a typical product. We were shipping 200,000 phones. So it's like a dollar per phone.
[00:14:17 - 00:14:28]
Craig Andrews
Just going to the tool. Right. And the thing that got me was how that just seemed really, really prohibitive. If, I mean, that was high volume in those days. Right.
[00:14:28 - 00:14:29]
Craig Andrews
That would just seem prohibitive.
[00:14:29 - 00:14:39]
Craig Andrews
How did you guys do toys? If I'm sitting there thinking, you know, a dollar per product just for the tool, how did you guys keep the price down with toys?
[00:14:39 - 00:15:00]
David Solomon
You know what? It I'll tell you what it was. Is again, it's back to smart manufacturing. It was not. It wasn't about we. We built it when we needed it. We didn't build it. You know, we didn't have to do 200,000 a day. You know, in some cases we just have these plastic cases. And we had our forecasts and we had our budgets and whatever.
[00:15:00 - 00:15:17]
David Solomon
And we knew what we had to do. And you know what? We went under a buck, I got to tell you, we were I if I remember correctly, our costs for so many things were like was negligible. Look, we sold Craig. I could tell you I sold these plastic case games with great with great items inside of it.
[00:15:17 - 00:15:20]
David Solomon
They retailed for 999.
[00:15:20 - 00:15:28]
David Solomon
I could tell you something. We made nice margins, and so did the retailers back in the day. In our case, they needed 4,040% gross margins.
[00:15:28 - 00:15:38]
David Solomon
In an industry that was getting 20 from the Mattel's, the Fisher prices and the Hasbro's in those days, we were giving them 40 to 45% and we were making money.
[00:15:38 - 00:15:38]
Craig Andrews
Yeah.
[00:15:38 - 00:16:05]
David Solomon
So it was really we got we figured it out. You know, we we produced in Dead Times because look at the toy on the street. You're shipping 70% of your goods between August and November. Right. So you know you have to manage cash flow but you also you're also manufacturing in dead time. So you warehouse it. And we were just our guys were really good at costing and really good at putting componentry together.
[00:16:05 - 00:16:10]
David Solomon
And, and really we competed incredibly, incredibly well. Yeah.
[00:16:10 - 00:16:27]
David Solomon
But but that was part of the people were people freaked out was like, but you spend so much money on your machines and your mold and your and your and your quality control. And look, I mean, we'd have 1200 employees to, to assemble and everything. And yet our unit costs were we were kicking ass.
[00:16:27 - 00:16:39]
Craig Andrews
Wow. Well, I mean, that's a real life example. I mean, as you pointed out, it's we're coming into this with assumptions and we've kind of raised the white flag saying,
[00:16:39 - 00:16:41]
Craig Andrews
we just can't compete when we can.
[00:16:41 - 00:17:00]
David Solomon
But you don't create this. This is the thing which we do is where are we getting this? Where are we getting this opinion from? Media. I got a friend. We didn't do the homework. We didn't research to see what can the market bill, what do we need to do to compete? We just assumed we're out. It's cheaper in China.
[00:17:00 - 00:17:18]
David Solomon
It's cheaper in Bangladesh. It could be, but it could also be more costly. You're not factoring in holidays there. You're not factoring the freight cost to bring it in. You're not factoring in what if you can only bring a 20ft container, not a 40ft container? It's not the same cost anymore. You're not factoring in all these things. You're just looking at.
[00:17:18 - 00:17:26]
David Solomon
I don't have to invest in here. Therefore, it has to be cheaper. They're not not necessarily.
[00:17:26 - 00:17:35]
Craig Andrews
Now here's something else. So this is just pure curiosity. I have every now and then see these videos of the containers falling off the ship and floating around the ocean.
[00:17:35 - 00:17:38]
Craig Andrews
How often does that happen? What does that do to the supply chain?
[00:17:38 - 00:17:48]
David Solomon
Look, if it I don't I couldn't tell you how often that happens. And I think that what we see on social and we see in the news is almost always exaggerated. But it does happen. Damage is going to happen.
[00:17:48 - 00:17:57]
David Solomon
Sometimes the containers on close properly and the salt of the sea or the heat gets in or the cold and it ruins the content you run that risk.
[00:17:57 - 00:18:19]
David Solomon
Is that every container? No. There's another risk you didn't even talk about is what if there's a strike at the port like we had a few years ago? And you couldn't release the container with the goods, right. What does that do to your business model? And so these are the commons conversations that you don't have. And and you wouldn't have these conversations if you manufactured in the United States or in Canada.
[00:18:19 - 00:18:36]
David Solomon
And that to me is, you know, this is the advantage that you could share with your clients is you never have to worry about supply chain because we are covered. We will have the merch you don't have to worry about, oh, what if China or what if this or what of that?
[00:18:36 - 00:18:49]
David Solomon
It's I know a lot of people who were very frustrated in the last few years post Covid, all these transport problems, all these logistics problems, just to get the goods to their warehouse.
[00:18:49 - 00:18:52]
Craig Andrews
Yeah.
[00:18:52 - 00:18:52]
Craig Andrews
Let's,
[00:18:52 - 00:18:54]
Craig Andrews
pivot a little bit and talk about,
[00:18:54 - 00:18:58]
Craig Andrews
getting into new markets because that's kind of what you do. You help people do that? Yeah.
[00:18:58 - 00:19:11]
Craig Andrews
One of the things that you said that really surprised me is if I have a good I want to shift into Canada. It doesn't matter if I'm only shipping. My only market is Alberta.
[00:19:11 - 00:19:14]
Craig Andrews
I have to have French on it.
[00:19:14 - 00:19:37]
David Solomon
Oh, so by law, if you're going to go to retail, then by law, your packaging has to be bilingual. This is a lot has been in effect for for probably close to about 50 years. It was it was actually a very smart protectionist move by the Government of Canada so that we'd have to actually assemble or repackage or something here in Canada in a bilingual sense.
[00:19:37 - 00:20:06]
David Solomon
Look, 20%, 25% of our population are French-Canadian. So you do want to be able to cater to that market. But if you're selling B2B, no, you don't need it to be bilingual unless unless you're shipping it to Quebec. Because if you're shipping it to Quebec and there's an instruction, or if there is a something that needs to be repurposed, reinterpreted or whatever, you would be shipping just the same way you ship to France in French, you have to you should ship it to Quebec with, with, with.
[00:20:06 - 00:20:17]
David Solomon
Things are done with them in French. If you're shipping componentry or stuff to be assembled now, it doesn't have to be bilingual. But if it goes to retail, in theory it has to go,
[00:20:17 - 00:20:25]
David Solomon
has to be bilingual. But if you do ship it to a national chain, they will demand it bilingually.
[00:20:25 - 00:20:31]
Craig Andrews
What? What are some other considerations for, you know, American manufacturers that want to ship into Canada?
[00:20:31 - 00:20:40]
David Solomon
Well, first of all, the size of our country, like, we're, we're we're the second largest country in the world, but we only have seven cities. So when you're considering Canada,
[00:20:40 - 00:20:50]
David Solomon
where are you going? Especially if you, if you're shipping for if you're exporting for the first time and you've never exported the distance from wherever, like you're in Texas, right?
[00:20:50 - 00:21:08]
David Solomon
So for you to go to Montreal or go to Vancouver might be the same. But if I'm in you in a state of New York and I want to ship shipping to Montreal versus shipping to Vancouver as a whole other animal, and so you got to look at like, we are not as populous as the US were not.
[00:21:08 - 00:21:12]
David Solomon
It has many cities in the US, but man, were such a large country.
[00:21:12 - 00:21:15]
David Solomon
And yeah, we have different laws. We have different,
[00:21:16 - 00:21:27]
David Solomon
you know, environmental laws, packaging laws. You know, we have an anti plastic law, for example, in Canada. So if you're a single use plastics company and I can do so well in Canada right now.
[00:21:27 - 00:21:46]
David Solomon
So when I tell people when you're going to look at exporting, know the laws at the federal level and also at the provincial level, just like in the U.S., you want to know federal law. You need to know state law. But don't assume because it works like that in your state. That's how it's going to be in every province in Canada.
[00:21:46 - 00:22:08]
David Solomon
Yeah. And by the way, that works. Globally, it's not just, you know, like I help a lot of companies, not just in North America. I have companies around the world that I help them, bring them to other markets. We have the same conversations, you know, where do you want to go? What are the external factors? Be very careful of the external factors because that is something that is non-negotiable.
[00:22:08 - 00:22:23]
David Solomon
You know, you can negotiate a lot of things, but you can't negotiate laws and you can't negotiate, you know, environmental concerns. And you can't you can't negotiate legal concerns. So make sure you know all that before you go into a market. Don't assume anything.
[00:22:23 - 00:22:36]
David Solomon
And if you're not sure what I'm talking about of assumptions, see the target case when target came to Canada and how they blew their brains out here, people they lost, I think it was like $3.5 billion lost in their move to Canada.
[00:22:36 - 00:22:41]
David Solomon
Oh, yeah. Wow. Yeah. It was a massive failure in here because they just end up retreating.
[00:22:41 - 00:22:43]
Craig Andrews
Or did they fix their ways and go back in?
[00:22:43 - 00:22:50]
David Solomon
No, they they they they they withdrew and they never came back. Wow.
[00:22:50 - 00:22:58]
Craig Andrews
Wow. How many. Just out of curiosity, I mean, how much will it cost once or 3.5 billion in the hole. How much would it cost to actually.
[00:22:58 - 00:22:59]
David Solomon
Well, look, they had
[00:22:59 - 00:23:01]
David Solomon
they had they had bought a chain,
[00:23:01 - 00:23:20]
David Solomon
a former retail chain here called Zellers, about 300 stores. They revamped most of them to, to make it look like a target. And everything was fine, except they didn't price it like target does in the US. They changed that. Canadians just went. You're not who you say you are.
[00:23:20 - 00:23:33]
David Solomon
You look like target. You smell like target, but you don't have prices like target. You don't have the merchandise like you know, target shelves were empty. Problems of logistics problems, whatever. And they literally filed for bankruptcy and pulled out of Canada.
[00:23:33 - 00:23:40]
Craig Andrews
Wow. You know, one of these days, I might have a business where I can lose, 3.5 billion, and that's.
[00:23:40 - 00:23:47]
David Solomon
What you see. But that's the thing. So a large, large corporations. Look, Dunkin donuts was in Canada. They're gone.
[00:23:47 - 00:24:02]
David Solomon
You have a lot of other Americans who retailers who came to Canada, and they're gone. And when you're large and you can throw away that kind of money, that's wonderful. When you're an SME, a small to mid-sized manufacturer, company or whatever it is, you don't have that.
[00:24:02 - 00:24:26]
David Solomon
That could destroy your whole business model. Which is why going into a new market based on gut feel, not about researching, not about really doing the right analysis, not really understanding market trends, which is what target failed, that they did a lot of homework, but they misread the the buying patterns of people in Canada. Totally misread it. You can't afford it as an SMB to make that mistake.
[00:24:26 - 00:24:39]
David Solomon
That doesn't mean you shouldn't export. It just means double down on understanding the market, the culture, the nuances before you go into that market. That, to me is one of the biggest lessons that I share with all my clients.
[00:24:39 - 00:24:43]
Craig Andrews
Yeah. So my wife and I, we live in Texas,
[00:24:43 - 00:24:47]
Craig Andrews
we have grandkids in College Station. There's a bunch of small towns,
[00:24:47 - 00:25:02]
Craig Andrews
or if we go on up to the Dallas Fort Worth Metroplex, we go through a bunch of small towns and I explain it to my wife. That's why I say, imagine you lived in this little town and you have a certain amount of money.
[00:25:02 - 00:25:28]
Craig Andrews
And let's say I go to the baker and I buy something from the baker. He gets some money, but there's loss, you know, there's transaction loss, materials loss and what have you. And then the baker goes to the dry cleaner and get some dry cleaning. And there's more loss. There's eventually you're going to go broke. If you never have outside money coming into that town.
[00:25:28 - 00:25:58]
Craig Andrews
And I would say the same thing about the United States. We've had this trade deficit for years, and it worries me because, you know, now we have bigger levers that we can turn that that, you know, soften that. But fundamentally, I feel like in any economic system, you need to be focused on bringing dollars, you know, bringing money from outside your community into your community if you want to prosper.
[00:25:58 - 00:26:23]
David Solomon
I think that's very, very accurate. And I don't, you know, I mean, recycling the money inside your market, you're right. Eventually you're buying goods and transfer by goods from outside your city, town, province, state, whatever it is. And you're right, that money will disappear from that economy. So if you don't have external money coming in, you're just going to keep losing and eventually you'll get down to zero.
[00:26:23 - 00:26:31]
David Solomon
We're saying the same thing. Look, Canadians and Americans have a lot of beautiful things to offer. I joke around Canada doesn't just only
[00:26:31 - 00:26:36]
David Solomon
offer maple sirup and hockey sticks to the rest of the world. We do have other things that we can provide.
[00:26:36 - 00:26:40]
David Solomon
The US has kind of gotten away from that. You know, we're a service market.
[00:26:40 - 00:27:08]
David Solomon
We're an intellectual market. Great, wonderful. But you're, you're a talented manufacturing market. You have a talented producing market, you've got a phenomenal farming industry. Make it attractive for people to buy from you now, again, attractive as mean price. Give them what they can't get from somebody else. And I think that us know how if it was focused on that would work.
[00:27:08 - 00:27:32]
David Solomon
Stop copying. You know, look the auto industry, you lost your your strength in the world because you didn't innovate. You let the Japanese and the Koreans take that dominance away from you. Yeah. Now, why would I want to buy an American car otherwise other than made in USA? But look what's happening. Honda makes in the US, Kia makes in the US, so that makes in the US.
[00:27:32 - 00:27:45]
David Solomon
German cars are being made in the US because they want the US market. So why did they figure it out and not Americans? So I think we just gave up too fast. Yeah. We don't need this anymore.
[00:27:46 - 00:27:49]
Craig Andrews
Well, BMW has a huge factory in Spartanburg,
[00:27:49 - 00:27:51]
Craig Andrews
South Carolina. Yeah. Huge factory.
[00:27:51 - 00:28:16]
David Solomon
Yeah. Look, it's not just Ohio and Michigan that, you know, the Rust Belt, if you will. That it is. It's all over the country. But that's just the auto industry, other industries you you can be dominant in. But when you take that and you bring it overseas, you're sending your intellectual property to somebody else. You're sending your know how to somebody else, and they're going to get better.
[00:28:17 - 00:28:27]
David Solomon
And what are you doing? So I think the what's happening today is to try to bring back to America the manufacturing. And I'm not going to get into the politics behind it. Craig,
[00:28:27 - 00:28:38]
David Solomon
this is not a political channel. If you want to talk to me, politics get come to see me offline. But I think, wakey wakey, people, because you've let too much leads us.
[00:28:38 - 00:28:52]
David Solomon
Yeah. And you're no longer the dominant force in that area, you know? Sorry. You have. Yes. It can be made cheaper somewhere else, but cheaper doesn't mean better.
[00:28:52 - 00:28:55]
Craig Andrews
Well, one of the examples I like to point to,
[00:28:55 - 00:29:10]
Craig Andrews
I went to NC state. Which one of their strengths is developing the technologies that help us manufacture semiconductors? One of the top universities in the nation. And so we did all this work.
[00:29:10 - 00:29:17]
Craig Andrews
Yeah, I mean, I one the professors in our department was like the inventor of the jet, which was an early transistor.
[00:29:17 - 00:29:18]
Craig Andrews
And,
[00:29:18 - 00:29:32]
Craig Andrews
and so we had this ability and for some reason, we let all that capability go to Taiwan. Yeah, primarily to one company that now produces, like, 90% of the world's chips.
[00:29:32 - 00:30:01]
David Solomon
And now look at what's happening with Nvidia. They want to bring it back to the US. Yeah. And you have these political nutcases are saying no that's no no no no. Bring it back. Own it, dominate it. I American know how it is. I'm a Canadian people and I'm not waving the U.S. flag. Don't don't don't don't get me wrong here, but North America, US and Canada, I should say North America, U.S. and Canada has let go of the manufacturing process and let someone else own it and dominate it.
[00:30:01 - 00:30:22]
David Solomon
It might take years until if the investment is there, it might take years for it to come back. And you may have to train a lot of new people to to do it. But if you don't, you're just going to be a net importer. And to your point about the trade deficit, that'll never go away. And that is that in that case, you're you're heading towards bankruptcy.
[00:30:22 - 00:30:24]
Craig Andrews
Right? Yeah.
[00:30:24 - 00:30:51]
David Solomon
And I think that and I think American growth, look, you're a powerful market of over 300 million people. You I think you're 25% of the global economy. I get all that. But the world wants American goods. South America, Africa, Asia, Australia. They want a good wants American goods. They want American knowhow. Go out and get it. That's how you're going to get at a trade deficit, not just by staying at home.
[00:30:51 - 00:31:01]
David Solomon
Like you said, keep recycling the money in the United States. Eventually you'll run out, bring in foreign currency, bring in people buying your goods. You're going to see prosperity.
[00:31:01 - 00:31:19]
Craig Andrews
Yep. So for people that are listening, and maybe they bought into the whole idea of I, you know, I probably can only sell domestically for somebody that has something. What would be a good first step outside the United States or outside Canada to,
[00:31:19 - 00:31:21]
Craig Andrews
target.
[00:31:21 - 00:31:22]
David Solomon
Depends on your industry.
[00:31:22 - 00:31:32]
David Solomon
Every market's a little bit different, but my my comment to them is not where should you go? It's where you should think of going. And look at markets that are emerging,
[00:31:32 - 00:31:42]
David Solomon
Malaysia, Vietnam, South Korea, Mexico, believe it or not, parts of South America, they're going to they want they'll buy from you.
[00:31:42 - 00:32:02]
David Solomon
But they're smaller markets to learn from. So you're not going to go, you know, to a I know U.S is big but you don't you to handle another big market could be very disruptive to your business. So what I tell them is think small. Find that first you know look at where there's very little competition for your goods, where you can actually sell it at a higher price point.
[00:32:02 - 00:32:26]
David Solomon
Make a few more, make a better margin and learn the export game. Once you do that for a year or 2 or 3, go find another market and another market and eventually you'll see over time you're gonna start adding two, three, four markets at a time. If you want to go in that scale and grow. I mean, not everybody wants to scale that fast, but you could and you're going to see how well you're going to do so.
[00:32:26 - 00:32:47]
David Solomon
I can't tell you today without, you know, yes, this is the market to go to because that's the best. But depending on your industry, find a small market that you can manage. It's like going to a 50 another state I don't want to say 51st acres. You'll think I'm saying Canada. But I'm saying, you know, got to find a country that's the size of one of the US states and learn how to deal.
[00:32:47 - 00:33:11]
David Solomon
Learn how to deal with bills of lading, letters of credit, all these kinds of things that you've never dealt with internally. See how your your operation works. Make sure it doesn't disrupt you that much. Make sure your leadership is aligned. Your processes are well established. Your marketing is well communicated. Once you do that, if you make a mistake to your point before, if you make a mistake there, it's a minimal pain.
[00:33:11 - 00:33:19]
David Solomon
You're not a target. But but if you do it right, the next move is going to be even more profitable than the first one.
[00:33:19 - 00:33:26]
Craig Andrews
Do any of your clients in in the US take advantage of the import export bank?
[00:33:26 - 00:33:38]
David Solomon
Not. Yeah. Yeah. No. Yeah. You know, there's nothing I want to say. So when you go and export the US government and some states have wonderful funding programs, by the way,
[00:33:38 - 00:33:52]
David Solomon
and these programs open and close all the time. And if you can grab it. So, like, sometimes it'll be money towards trade shows or money towards exporting or money towards more operation and more labor in your company because you're doing more business.
[00:33:52 - 00:34:00]
David Solomon
That is something. Sit with your accountant or your CFO, let them find and dig because they're going to find those programs,
[00:34:00 - 00:34:03]
David Solomon
to help you more than I can.
[00:34:03 - 00:34:08]
David Solomon
I always send that to the to the accounting department. Say, go find us programs.
[00:34:08 - 00:34:20]
Craig Andrews
Yeah, well, am I understanding of the import export bank? Was it was set up. It's specifically for small businesses to help them sell abroad. And I think it's primarily GE selling, you know, getting money from,
[00:34:20 - 00:34:24]
Craig Andrews
taxpayers so they can sell jet engines overseas.
[00:34:25 - 00:34:45]
David Solomon
You look again it it's it's there a lot of these things out there and you have to apply and you have to have the but they all want a plan, by the way. And this is something I tell her. I was like, you can't ask for money without a plan. Yeah. So this is what I bring and I'm this is not the sales pitch, people, but like, this is what I do is I work with the company to find the market and to develop the go to market plan.
[00:34:45 - 00:35:06]
David Solomon
Then you can go for the funding and watch it come in. It's what it's way better when you it's like when you started your business, you did a business plan. This is a business plan. Part two a little later. Well, actually a lot later. But then when you go and you bring it to whatever funding, you're likely to get the money and then you internally, your team understand what you're trying to do.
[00:35:06 - 00:35:14]
David Solomon
And we're trying to go. So that preparedness makes your new market entry much, much better.
[00:35:14 - 00:35:21]
Craig Andrews
So I have a question. It can seem out of the blue but it actually has a purpose. I'm going somewhere. What's the birth rate in Canada.
[00:35:21 - 00:35:24]
David Solomon
Under two often but correctly.
[00:35:24 - 00:35:27]
Craig Andrews
Slightly under two or significantly under two.
[00:35:27 - 00:35:30]
David Solomon
Can tell you. But I remember it was under two.
[00:35:30 - 00:35:47]
Craig Andrews
That's and we are in the U.S. I don't know the exact number, but we're under two. And as bad as that is, we actually have an advantage because China, Japan, Russia, Europe, their birth rate is horrible.
[00:35:47 - 00:36:07]
Craig Andrews
Their birth rates are horrible. And so there's only so much time when before China runs out of the laborers to do all the hand assembly. There's only so much time before these other countries are going to have trouble filling the factories with people. I mean, and just putting things in perspective, I,
[00:36:07 - 00:36:12]
Craig Andrews
I was touring a factory in Japan in the late 90s.
[00:36:12 - 00:36:13]
Craig Andrews
And,
[00:36:13 - 00:36:19]
Craig Andrews
I, you know, you had that typical wall, the glass wall where you can look in to the factory and,
[00:36:19 - 00:36:30]
Craig Andrews
for the visitors. And I looked in there and there was a whole bunch of signs in Portuguese. I see all these Japanese walking around, and the signs are in Portuguese. And I ask our guide, I was like, what are the signs in Portuguese?
[00:36:31 - 00:36:38]
Craig Andrews
And they said, oh, those are ethnic Japanese that fled to Brazil, you know, over 100 years ago.
[00:36:38 - 00:36:40]
Craig Andrews
We need more workers.
[00:36:40 - 00:36:54]
Craig Andrews
And yeah, Japan has a little bit of a racial issue. So they, they say they were looking for Japanese, you know, to keep the blood pure, to repatriate to Japan to fill their factories. They were doing that in the 90s.
[00:36:54 - 00:36:56]
David Solomon
You know, and we see right now,
[00:36:56 - 00:37:14]
David Solomon
I think Germany tried to solve its, its labor problem with a massive immigration program. Canada's try to do it and whatever. It's broken again. I don't wanna get into the politics of it, but it's a broken system. We're not teaching our kids trades in schools. We're pushing them to go to, let's say, to university.
[00:37:14 - 00:37:18]
David Solomon
And, you know, most of my three kids graduated from university. Congratulations.
[00:37:18 - 00:37:24]
David Solomon
And I know my son well, my other son's friends, they got their university and then went to trade school.
[00:37:24 - 00:37:33]
David Solomon
If we started thinking like that, let's get them into trades earlier on. I mean, yeah, I guess what people will want to go into it. It's exactly the exciting.
[00:37:33 - 00:37:36]
David Solomon
We're not doing that anymore. So we're bringing in labor from overseas.
[00:37:36 - 00:37:52]
David Solomon
And that's that, that that system isn't necessarily functioning as well as it could. But, you know, Craig, the problem with what we're just talking about is it's everybody said that's tomorrow's problem. That's 20 years from now, you know, what am I doing today? How can I fix my problem today?
[00:37:52 - 00:38:14]
David Solomon
And the answer is, yeah, you're going to have to invest. You're going to have to invest. Yeah. And you know what the net result is could be extremely positive. But if you invest in people today and you invest in, in, in, in your machinery, invest in growing, it's amazing the results if it's, you know, but don't do gut feeling and don't do it on a whim.
[00:38:14 - 00:38:34]
David Solomon
And don't be reactionary. You know, I tell people we're going to pick a market together, but we're going to have a pivot plan in case market eight crops up. We're going to get our good, be, you know, we always have a backup plan. So if you again plan, you know, what is it? You know, those that fail to plan plan to fail, right.
[00:38:34 - 00:38:52]
David Solomon
This is what it is. You got a plan it and be strategic about it. I can't worry about what's going to be like in 2025 years from now. I don't have grandchildren yet, but I can't worry yet what my grandchildren are going to be doing when they're when they're alive. That's on the politicians to figure it out. Like they got to make it more attractive.
[00:38:53 - 00:39:11]
David Solomon
And the systems have got to be ready for tomorrow's generation to be become wanting to work in factories, wanting to work as manufacturing, get back to the trades. We've lost that. We've lost that encounter. We've lost in the US. We got to get back to it in order to like so we don't lose our dominance in the world.
[00:39:11 - 00:39:17]
Craig Andrews
You know, David, I, we, we we've proven we can chat for hours.
[00:39:17 - 00:39:24]
Craig Andrews
Yeah. But I, I really appreciate what you do and,
[00:39:24 - 00:39:41]
Craig Andrews
you know, and we we are North America. We need we need North America to do well. We need manufacturing here. And back to my little analogy of the small Texas town. If there's not money flowing into that town, that town will die.
[00:39:41 - 00:39:56]
Craig Andrews
Yep. And so I appreciate what you do. And helping North American companies figure out how this ship outside of North America to bring some of that foreign money in. Right. How can people reach you?
[00:39:56 - 00:40:06]
David Solomon
So, Craig, I'm I'm an easy guy to find. I'm on LinkedIn. Look up David I Solomon my actually my my link is David Solomon 13. I'm there
[00:40:06 - 00:40:19]
David Solomon
info at syracuse.com Spro growth.com is that those are the two best ways to reach me right now. Or you can get my website at Serial growth.com. All the ways to reach me.
[00:40:19 - 00:40:20]
David Solomon
They're all there.
[00:40:20 - 00:40:23]
Craig Andrews
Excellent. Well thanks for coming on Leaders and Legacies.
[00:40:23 - 00:40:34]
David Solomon
Thank you Craig. Really appreciate it.
[00:40:34 - 00:40:56]
Craig Andrews
This is Craig Andrews. I want to thank you for listening to the Leaders and Legacies podcast. We're looking for leaders to share how they're making the impact beyond themselves. If that's you, please go to Ally's for me.com/guest and sign up there. If you got something out of this interview, we would love you to share this
[00:40:56 - 00:40:58]
Craig Andrews
episode on social media.
[00:40:58 - 00:41:21]
Craig Andrews
Just do a quick screenshot with your phone and text it to a friend, or posted on the socials. If you know someone who would be a great guest. Tag them on social media and let them know about the show, including the hashtag leaders and legacies. I love seeing your posts and suggestions. We are regularly putting out new episodes and content to make sure you don't miss anything.
[00:41:21 - 00:41:29]
Craig Andrews
Please go ahead and subscribe. Your thumbs up. Ratings and reviews go a long way to help promote the show. It means a lot to me.
[00:41:29 - 00:41:40]
Craig Andrews
It means a lot to my team. If you want to know more, please go to Ally's for me.com. Or follow me on LinkedIn. Thanks for listening. We'll see you next time.
