Episode 261: Joshua Dick on why businesses should aim to grow like a lobster
April 14, 2020
[Note: this episode was recorded before the pandemic.]
Our guest today is Josh Dick, who accomplished the dream of many entrepreneurs.
In the year 2000, after stints as an investment banker at Salomon Brothers and as a Marketing Manager at Unilever, Josh joined Urnex, a small manufacturing business that was founded by his great-grandfather.
Josh would go on to lead the company through fifteen straight years of 15% annual growth, and then he sold the business to a private equity firm for a sum that allows him the flexibility to choose what to do with his time.
And what he’s done is move his family to Florence, Italy, learn Italian, begin advising other entrepreneurs, and write a book titled Grow Like a Lobster: Plan and Prepare for Extraordinary Business Results.
You can find Josh’s blog and contact him via his website, https://www.joshua-dick.com/
Will: Hello, Josh. Welcome to the show.
Josh: It’s so nice to be here. Thank you for having me.
Will: Josh, let’s start with this. How do, in fact, lobsters grow?
Josh: Lobsters grow in a way that, to me, is a scary, painful, and traumatic experience. Unlike humans, who maybe grow just a little bit at a time, lobsters save it all up and seem to grow once a year, or depending on their age, more frequently, and they do so with just this drama. In order for a lobster to grow, it actually has to rip its entire body out from inside of its shell.
Josh: Many die trying to do this because you can imagine what it seems like to rip your claw out from the inside of the leg shell. If they don’t do it quickly enough, sometimes their gills stop working and they die. Many lobsters have been known to actually rip off the claw, shed the claw, just so that he can make it through the molt process.
Will: Ouch. Then, what happens once they’ve ripped themself out of the shell? It’s hard enough once they’re cooked sometimes to get the lobster out of its shell, but what happens once they’ve ripped themself out? Now, they’re this shelless, tasty little morsel.
Josh: Well, for me, that tasty little morsel, that type of lifetime is what I found a connection to in my business. As I imagined what lobsters go through when they go through the molt process and the shedding process, and I saw and I had this image of this very, very vulnerable creature sitting on the ocean floor without a shell, I looked at it and imagined myself and my business. I felt like there were times in my business that I was so vulnerable, that I was just like a lobster that had shed its shell and needed that time for my protections to grow back and my strength and my business security to come back.
Will: Yeah, it’s a really interesting metaphor that you use, and we should mention that your book is Grow Like A Lobster. I found it very powerful because businesses don’t typically grow just this incremental small percentage every single day on this continuous basis. But there’s periods of real dynamism, and then static, where you move into a new factory or you take on a massive new customer or you do a merger or you do a market entry into Asia, or you do some major transaction that really makes you vulnerable and where you’re under a lot of stress.
And then, there’s some times where you’re operating the business as normal and just taking care of routine. So, your metaphor of growing like lobster really helps illustrate that. Tell us about some times when you felt like that molting lobster in your business Urnex, a family business, which you ran for I guess about 15 years, and maybe you should tell the story of Urnex, how did you involved in this family business?
Josh: Absolutely. I’ll try and give you a little bit of both parts of that question there. For me, the molt of a lobster isn’t something about these little things that happened through a business. I think it’s more about awareness. When we can have an opportunity to understand that businesses, like lobsters, go through these ups and downs, where things are really good, where our shells are hard and we’re secure, but we know that the molts are coming and we’re going to have difficult times in the future, we can use that awareness of ourselves and our businesses to plan and prepare.
So, we can think like a lobster and grow like a lobster by recognizing that there are going to be times when we’re strong and secure with hard shells, but the bad times are always out there. And I happen to think that if you’re aware that the bad times and the difficult times are coming, they are a whole lot easier to deal with. So, I can go on and tell you a little bit about the story of Urnex as you [crosstalk 00:03:56].
Will: Yeah, let’s do that.
Josh: … to in my earlier… Yeah, okay. Urnex is an interesting story in that Urnex was a business started by my great grandfather back in 1936, way different business than anything that it became when I was involved, but that shell, let’s use that lobster terminology again, was there when I got involved in about the year 2000. And the business, at that point, was a collection of seven different product lines, only one of which was what I would eventually pursue in the business that I built and developed.
We had textiles, we had fabrics, we had products for the restaurant industry. We had this one little small connection through the making of cloth coffee filters with the coffee industry. Urnex or Urnex brands, as it became known, became the global market leader in manufacturing and distribution of cleaning products for coffee machines. Talk about a pretty boring and simple business on the surface, but it was one that really required us to go around the world specializing our formulas, our packaging, our delivery devices for every type of coffee equipment that might be out there, whether it be something you would use in your home or something that might be used at a commercial establishment or restaurant or a specialty coffee chain.
Will: Now, in your book, you have a chapter about the product lines and you talk about this, that when you came in you, as you mentioned now, you had seven different product lines. It must have been a scary decision on your part to pull out of those business lines that were bringing in revenue. Tell me a little bit about lemon covers.
Josh: Yeah, lemon covers was one of the very interesting and exciting business product lines. Lemon covers where, as the story goes, created by my grandfather and those of you who may have seen them on a lemon. It’s a little piece of yellow or white gauze wrapped around a piece of a lemon designed to be squeezed so the pits stay in the bag and the juice can come out. Became this very designer product at high end restaurants in the seventies and eighties. It was there as part of the business when I got involved. That along with, as you said, six other product lines, none of which had what I felt was what I would call ownability or scalability.
There was nothing personal, nothing able to be branded, nothing that I felt protected and secure to use the lobster term, nothing that gave me a sense that I had a nice shell. And the only product line that I did find an attraction to was this world of coffee. And for that reason I just said, “Listen, if I’m going to do this, we have to focus on one thing and do it really well.” We got rid of the other product lines. In fact, we closed over 55% of the revenue producing product lines in the business in order to just focus on one thing with the effort to really do that the best.
Will: Yeah, that’s a pretty bold move to downsize your business by 50% to focus on one product line when you’re not guaranteed that that thing’s going to take off. Tell us a little bit about how you went about, and I you talk about this in the book some, about how you went about making that something that was not just a generic commodity, soap commodity cleaner, but how you built a brand around that with emotion and a name that people would latch onto.
Josh: Yeah, I think one of the things that’s interesting about joining a business that had so many diverse different product lines, I had a chance to see how damaging and dangerous distractions can be to a business. Because I walked into a business that had seven different product lines, I realized that resources were being divided in such a way that no business was really getting the love it deserved. So, from that perspective, picking one piece of the business to focus on made a lot of sense.
Now, once I picked it, I knew that I had given up so much of this security blanket of revenue that came from the other businesses. I had to really go about defining the business and the brand in a way that I thought was going to be meaningful, not just to me for someone that had to spend his entire life focused on it or his business life focused on it, but also for the customer.
So, for me, I set out and really tried to understand the coffee industry. Even though we weren’t making coffee or roasting coffee or selling coffee, I recognize that cleaning products were an essential part of this very special industry. And I did my best to really learn about what it takes to make coffee, how our cleaning products were used, but most of all to understand the culture and priorities of the target consumer that I wanted to sell the products to. And that took a lot of time immersing myself and the entire, the entire team in those cultures and trying to get to know what was important to what the priorities were of the customer.
Will: Now, some people may be thinking that you’re talking about their home drip brewer, and I think Urnex is to have a consumer product. But primarily, it’s business to business. Could you talk about your typical buyer in the use case?
Josh: Absolutely. Absolutely. The business, really the strength of the business, although as you’re correct, we did eventually make many different products for cleaning home coffee machines, capsule machines and the like. The real core of the business was recognizing the value that could be created by delivering specialty cleaning products to the restaurant groups in chains. You know them all from the largest specialty coffee retailers in the world, like a Starbucks and a Caribou and a Pete’s and a Costa around the world. These are all companies that are out there putting their name on coffee, basing their entire business on coffee.
And coffee is this really, really interesting product that what we love so much about it, this essence of aroma and flavor and oil, is also what is neglected and is not properly cleaned, can lead to this terrible bitter taste. So, only by cleaning a machine properly could these companies, these large, really high powered coffee retailers, maintain the quality that they were delivering to their consumer. We at Urnex became uniquely positioned to understand what they were trying to do and develop products that could help them keep their equipment running properly and delivering the best tasting beverages possible.
Will: Now, Josh, you’re one of the most practical guys I know, no nonsense. In your book, you have a chapter on really defining your mission and vision as a business, which some people might think feels a bit fluffy. Talk to me a little bit about what you did there, what was the mission and vision of Urnex, and why was that so important to you being the ultimate, practical, no nonsense executive and owner?
Josh: Yeah, absolutely. To me, it is incredibly important that before you do anything in building a business, creating a business, that you understand who you are and who you want to be. And as a young startup entrepreneur, I read it all. I read all of the books out there on how to write a mission statement and how to build and define your business. And what I started to realize was a lot of them were written for companies much larger than I was at the time. Maybe I aspired to be as large as a J & J, who’s often renowned for having done this process very well.
But I wanted to streamline it and organize it in a way that I had these documents created. So, what I did was really went about and wrote down what was important to me personally in a mission and vision statement, and also what I thought made the company a great place to work. With all of those facts, I took a lot of time to make sure that we were going to commit to it. I was a [inaudible 00:12:07] major as an undergrad in college and I had this fascination with the power of the constitution of the US government. The fact that it’s there, it’s been there for whatever it is now, 200 and almost 50 years as we’re getting there. And although we can interpret it differently in different times, the foundation of it is still there.
And that was how I started to look at what a mission was supposed to be for me. It was supposed to be a tool for making good decisions, going back and saying, is it really worth our energy and time to invest in this new product extension? Does it fit with what our mission is? And in essence, I developed this core set with my team of five statements in the mission and five statements under the vision or values world. And we spent a lot of time and ended up grouping it all together for simplicity’s sake into one really simple statement.
And that statement became, “It is our mission to help people make better tasting coffee.” And every word in that mission was actually well thought out. We didn’t want to say we want to help you make perfect coffee, because everybody has a different standard of what perfect coffee was. We knew that from the start that some of the high end specialty coffee retailers thought their coffee was the best. Whereas, some people just enjoy the coffee at their local convenience store.
Our mission and Urnex summarized into that one statement about helping you make better tasting coffee became about delivering products that help you no matter who you were, take whatever coffee you were preparing and make it a little better by cleaning the equipment properly.
Will: Can you give me an example of a decision that you made that, if you had been just purely profit-driven, taking opportunities as they come, you might have gone ahead with, but because of your mission and vision statement you decided not to pursue because it wasn’t consistent with the mission and the vision?
Josh: Yeah, it’s actually a pretty funny story. I’m not sure if I’d ever shared it with you, but our cleaning products or descaling products were used on coffee machines both in homes and offices, and as we said earlier, in food service establishment.
I got a call one day from a company that had a pretty high end Italian made a special machine in their offices. And that machine needed to be serviced, and when the service technician came to serve it, he brought Urnex descaling powder to work on the coffee machine. And this business happened to make humidifiers. And the guy who was running this company looked at the product and saw how amazingly it fixed his coffee machine and said, “Wow, we could really, really use a product like that for taking care of our humidifiers.”
He called me, asked for some samples, asked to have a little bit of an understanding of what we did. And the first thing I said to him was, “Sorry, we only make products for coffee machines. I’m happy to send you some of my stuff. I’m happy to give you some information. I would even help you find a distributor or another manufacturer that can do something similar.” Although it was very similar to what we were already doing. I just did not want to be distracted.
The guy was like, “Okay, send me some product.” We leave it alone and left it at that. And it went on, and every few months, he would call me and be like, “Hey, can you still talk to me today about doing humidifiers?” And I said, “No, no, really, we only do coffee machines.” And this went on for a couple of years where he would call, I would give him some advice. He tried to have a product made by someone else and he didn’t get the quality he wanted. He couldn’t believe that I wouldn’t do it. He started offering me higher prices. And then, we were charging the coffee machine manufacturers and I turned them down and I turned him down.
Josh: I will tell you that the funniest part of this story is that I had turned him down so many times, I had ignored him. I took a leave, I was away from the office for maybe two or three weeks when one of my children was born, a really nice paternity leave, and I left things in charge of a young marketing manager who was a guy I trusted with everything. The day or the second day I came back from my paternity leave, this young guy comes to me and says, “Hey, the guys from Switzerland or are coming today.” “What are you talking about?”
The whole crew of humidifier manufacturers were there and they were determined to have a product made. This guy had told him we could do it having no idea that I had turned it down so many times in the past. The truth is we ended up doing the business with them and charging them a huge premium just so that I felt comfortable with the fact that I was straying away from my focus only on coffee machines. And I told them to their face that we were going to charge them more because we needed to hold true to our values.
Will: Okay, that is pretty funny, you’re marketing manager going on independent operations. That really takes some real focus to turn away business, even if it’s just falling into your lap if it’s not core to your mission. So, great example. Let’s talk a little bit about what happened over time. I don’t know to what degree you want to share results, but you say in the book how your business, you manage to grow it nice and steady over a pretty long period of time. Do you want to talk about just how you manageD the growth of the business and how you ended up eventually exiting the business?
Josh: Absolutely. Absolutely. Yeah, for me, it was very interesting. Growth, I always wanted to grow conservatively. I liked growth, but I didn’t like the vulnerability, maybe of that molt type vulnerability that I imagined businesses faced when they grew too fast and had cash constraints or other issues going on. I was always out there, and I say in the book about driving the business with two feet, one foot on the accelerator and one foot on the brake at the same time, slow and steady, trying to find the opportunities.
Every year, we set out to have a growth of the top line of 15%, and every year on average we achieve 15%. Some years, a little bit more, some years, a lot more. But there were years that we had opportunities to really be even bigger than that 15, 20% growth range, and we turned away business. I remember saying to the team, “We have to stay focused. We have to stay in control of what we’re doing, and we want to just take it as it comes.”
So, we had 15 consecutive years of 15% growth. Just as an aside, when I was working on the metaphor of the book, I realized that every time a lobster molts, it grows 15%. So, I had basically been living this life of the lobster and not even known it. I had only been using the lobster metaphor in the business to remember to plan and prepare. And as I’m doing this research, I found out that my 15% a year growth was what was the same thing going on with these amazing animals.
The business did that every year for 15 consecutive years. And during that time, we grew from just this one simple product line based in New York selling in the US, to product sold in over 70 countries. We had opened distribution centers in Holland and Hong Kong. So, we were on three continents at this point, dealing with customers around the world. And the business had gotten really strong and really stable. We were extremely well positioned to take the molt as the age came.
But I also had a recognition that there were a lot of things in my life that were important to me. And I also had this sense of fear and vulnerability that so much of what I had created in terms of personal wealth was tied up in this one entity of which I was the primary shareholder. And I went about the process of very proactively exploring the options for sale and exit of the business.
And one of the things that I had experienced over the years with businesses in my industry, sometimes they would sell, a lot of times they would sell very reactively. Companies would be approached by an investor or by a strategic partner and basically answer the phone, hear that there was an interesting offer to buy their business, and they would take it. And for me, that was never going to be right. I wanted to have a really organized, disciplined approach to going out there and understanding what the options were. I can keep going, you know some of this story, Will…
Will: Yeah, keep going. Keep going because this is the dream of a lot of entrepreneurs, to grow their business. 15% for 15 years is amazing. And so, you accomplished what a lot of entrepreneurs are trying to do. How did you manage that process? Tell us a bit about that.
Josh: Yeah, I think the first part for me was talking to a lot of people. Although I had started my career in investment banking right out of college and I had a little bit of a sense of what goes on in terms of corporate valuation and how businesses are valued and developed, I didn’t really know what the market was like for a business like mine. We were growing, we were by no means an enormous company, but we were very, very profitable. We were very stable, we were very secure, throwing off significant cash. I needed to get a sense of what the market meant.
So, I just started calling everyone I could imagine that might know someone that could talk to me about things. And as part of that process of understanding the types of questions I needed to know and I needed to ask, I actually sat down and went back to what had been my business plan and turned my business plan into a little bit of a selling memorandum in some way. I sat down and wrote everything I thought a potential investment might want to know about my business, not so much with the intention of sharing with that investor yet, but just for me to think about what the business would look like to an investor.
And I started to get a really keen sense of what the value was, what our level of security was. I was really aware of our product mix, the concentration of our customers, our distribution, our manufacturing capacities. And I started to look and say, “Well, this thing is worth something.” It may sound a little bit crazy, but I never really thought I was going to be selling the business, at least not nearly as quickly as it ended up happening. 15 years, to some, may not be quick. To me, it seemed like a lot. I started to really get a sense of what the business was.
And from there, I decided, “Okay, if this was going to be something…” Let me back up a second. The amazing thing about the business and the opportunity for me was that I absolutely loved my job. I had the best job in the world. I was happy going to work every day. I loved the people that were on my team, I love the challenges and the puzzles and the opportunities and the sales and our entire organization. So, that, in itself, gave me incredible power in the sale process.
I realized that for me to sell this business and eventually lose my independence as the CEO, whether it be selling the entire company to a strategic buyer or selling to a private equity firm, the value had to really be right. Someone had to really entice me to give up this great job. So, my process started with basically trying to identify who might be the right advisors to hire. I had four firms come in and do something of a dog and pony show, which you may be familiar with, Will. I’m not sure if you remember.
Will: Yep, yep.
Josh: And really invited four different investment banks to come review the business plan, the business model that I had written and worked on. Let them see it, told them who I was, what was important to me in terms of a potential partner or investor, and gave them each, I think, probably a two hour slot all in one exhausting day, and listened to each of their proposals about how they would market and position the business.
They really thought about the work they were doing very much the way I thought about the work of selling coffee machine cleaners. I wanted to understand how they understood the potential buyers that are potential customers, and get a sense from them the values they thought they could achieve and the process that I might experience. For me, it was very important that we figure out a way to do the process of a sale very quickly because I didn’t want to be distracted from running the business, which I enjoyed.
I was very fortunate that things worked out where I found an incredible investor partner in the private equity firm called the Cortech Group based in New York. They came in and I sold the initial portion of the business to them in April of 2015. I could not, to this day, be happier with the group of private equity partners that I found in Cortech.
I found people that understood who I was as an entrepreneur and wanted nothing more than to help me make the business great, and that’s really what we did. I stayed on, involved with them as the primary investor, although I was still a significant shareholder, stayed on in the CEO role for about a year and a half after their investment, and eventually moved to a board role where, in that process, I worked with them to do a merger and another acquisition.
The business was eventually sold again in March of 2019 and the ultimate investor was the Carlyle group to give you a sense, based on the scale of the types of businesses and private equity investors that we were able to work with, how the business was perceived and the value that I think was created over that period of time.
Will: Can you talk a little bit about what you’re doing personally now that the company that you’ve left the CEO role and now the company’s been sold, what did you do with your personal life?
Josh: Yeah, a very good friend of mine suggested to me, after the first sale, that I definitely had some new found financial security, you can say my shell was hard, if you want to go back to the grow like a lobster metaphor, and what are you going to do? What’s next? How are you going to do things? And at that point, I was pretty staying in the CEO role.
But I sat down with my wife one day and we have three young daughters. We were talking about this idea of what are you going to do, what are you going to do? And this friend of mine said, “The world is open to you.” And that was where we had the idea to pick up our family from where we were living in New York and relocate the entire family where the weather was better than New York. We could find great international schools. Everyone in the family can learn a new culture and a new language. And now, I’m on my fourth year living in the beautiful city of Florence, Italy, and loving every minute of it and really having a new challenging, stimulating experience living here in Italy every day in a different way than I did as the CEO of Urnex. But really in a wonderful way.
Will: You’re living in Florence where a lot of us dream just to visit, and you’ve spent some time writing this book Grow Like a Lobster. What else are you doing now that you have some financial independence? How are you spending your time? What’s the next stage in your career?
Josh: Well, my wife says that I probably need a full-time job to have more free time. So, that gives [inaudible 00:27:56]. I can tell you a few other things I’m doing. Starting with the book, the book was something that I really felt a sincere desire to produce and put out in the world. I felt like there were so many things that I learned along the way of running my business that I wish someone had shared with me, and I tried to put those in a book.
Since the book was released last fall, I’ve been out there giving lectures at business schools, particularly in the US. As you may know, I was just at Columbia. I went back to my Alma mater at Kellogg, and I was at Yale talking to students. It was so fascinating, so exciting to have those experiences interacting with students, telling the story of how I built the business along this lobster metaphor.
Another thing I’ve been doing is investing in coffee related businesses. Another former CEO from the coffee industry and I along with a couple of other people, have created our own small private equity firm, and we’ve been going out around the world making investments in businesses that we think are run by smart, experienced, or maybe not as experienced, but smart entrepreneurs with a lot of capability and potential. We’re not investing just to give these guys money. We’re investing because we think that maybe they want our help and maybe we have some help to offer. So, in that level, I’m doing a bit of advisory work with the CEOs of some of these businesses we’ve made investments in.
I’m also doing a little bit of blogging, as you can see on my website, joshua-dick.com. I have a blog and I’m probably not the most prolific blogger, but I try and get something out there once a month, little short, two to three minute reads. But I’m also finding myself doing a little bit of advising on a select basis with entrepreneurs that show something to me about their understanding of who they are and who they want to be, have a clearly defined mission statement and understanding of what their mission is, and have a focus that I can find a connection to.
And I want to be there to help. And I’ve found some interesting opportunities working with some of these entrepreneurs, both from an investment perspective and just from a personal fulfillment perspective.
Will: So, for an entrepreneur who has checked out your book and maybe heard this show and wants to reach out to you, where’s the best place for them to go, Josh? Is there a contact us form on your website? What’s the best way to get in contact with you?
Josh: Yeah, I think the best way to get in touch with me is through the website, which is joshua-dick.com. And on there, there’s a subscribe and a contact me form that lets you get on my newsletter, but also will send an email directly to me and I’ll have a chance to review it and respond.
As you and I talked about it, I’m fortunate enough that I’m not necessarily in a position where I’m looking to be some full-time consultant, but I’m also a super curious guy, super excited for smart, intelligent businesses, and really enjoying giving back in that way where people that are recognizing some value in the book or maybe there’s some idea that I have that confirms for them that their idea wasn’t crazy, or maybe confirms to them that their idea was crazy and it helps them feel better about themselves in one way or another. I like giving that back and I’m really finding that an exciting opportunity.
Will: Josh, that sounds like you have a full plate, even without a full time job, with spending some time with your kids, and I guess you’re also learning Italian and advising entrepreneurs?
Josh: Yes, I’m very proud of my Italian language skills. Although my American accent, I’ve been told, will never go away. I can communicate to a point where I’ve even made people laugh. And that is my standard of excellence in Italian.
Will: That is like getting an Oscar in Italian. It has been great having you on the show. Thanks so much for joining.
Josh: Thank you so much, Will. It’s such a pleasure to be here and I’m just so appreciative of the time you’ve put in in having me on.