Tool time

Executive Summary
Issue. Growth Industry. Manufacturing Key. Having a plan for growth can help you capitalize when the timing's right.

When Michael Shaluly started his business, he didn't have a plan. “I didn't have a clue,” he says. In fact, he wasn't really intending for it to be a business at all. It just happened.

Fresh out of high school, Shaluly worked as a tool manufacturer. In 1983, he needed to make a little extra cash, so he did decided to do what many young people do — moonlight out of his garage. By 1985, he incorporated his businesses and two years later he made the jump from his garage to a 1,000-square-foot manufacturing plant.

He says he remembers thinking, “I'll never outgrow this.”

He did, and today Shaluly's rotary cutting tool company, Mastercut Tool Corp., has 100 employees in its 70,000-square-foot manufacturing facility in Safety Harbor. The company has a European sales office in the Netherlands, and warehouses in California, Michigan, Texas, Indiana, England, and Shanghai. Products manufactured in the Florida facility are distributed to more than 40 countries, with international exports making up 35% of the business.

Though Shaluly says growth over the past few years hasn't been as impressive, the company still has managed to grow 3% to 4% each year. “Some really good years, the company experienced 20% growth,” he says.

“If you go to Home Depot and see a name brand cutting tool, we probably made it,” Shaluly says. The business is split about half and half between its private label and brand business, but the branded business is growing.

“I got my business degree by working,” the 55-year-old president says. Below, he willingly shares the lessons he's learned during the past 30 years.

Be open to a consultant's advice
Shaluly says it took a while for him to be comfortable working with outside consultants, many of whom he felt would tell him what he already knew. He says he knew the problems and wanted solutions. Now he says he understands consultants have to ask questions to understand the business before offering advice.

When the company purchased the building across the street, he says he thought it would be smart to move all special products manufacturing in that facility. After a consultant ran him through a few exercises, it turned out he was wrong. It made more sense to have the most consistently run product in the other facility. Listening and trusting the consultant brought more efficiency.

Follow technology, but don't chase bright shiny things
Much of Mastercut's growth can be credited to advances in technology, Shaluly says. But it makes it difficult to avoid chasing every new technology rolled out. “When you see tech helping, you say, 'Hey, let's go get more technology,'” Shaluly says.

In 2002, the company bought an expensive machine that wasn't a fully developed concept. It's one of the decisions for which Shaluly wishes he could have a mulligan. Mastercut used it just long enough for it to pay for itself.

Learn to let go
Because Shaluly started as a toolmaker, it was hard for him to pull away from supervising the day-to-day manufacturing. “You have to find good people and allow them to do their work,” he says. “I had to train — and I had to learn to completely let go.”

Build a business plan
After years of operating without a business plan, in 1996, the company wasn't doing too well. Shaluly knew things needed to be done differently. He needed a business plan.

Shaluly hit the books and spent time talking to people in the industry. Today the company has several business plans in motion: a one-year plan, a five-year plan and longer-range plans, which are updated as the company grows.

Know that marketing investments can pay off down the line
Several years ago, the company paid to run a full-page ad in the Thomas Register of American Manufacturers. He questioned whether it was a wise investment, but two years later, he received a call from someone paging through an old copy of the book who needed a tool. That call turned into the company's single largest customer. “Just shows that you never know when that marketing might pay off,” Shaluly says.

Investments in the community always pay off
“Sometimes the greatest advice is hidden,” Shaluly says. “Put time working in the community. If you give of yourself, if you are sincere, you will be rewarded.”

This year, Shaluly is chairman of the Safety Harbor Chamber of Commerce. “Through the chamber, I met people who helped guide me,” he says. They led him to business consultants and suppliers. “It really helped build the foundation of this company.”

Customer needs come first
Shaluly says if you ask any Mastercut employee, “What's your job?” they will all respond that their No. 1 job is to make sure the customer's needs come first. It's true for any team — all employees are part of the Customer Needs Come First (CNC 1st) team.

Invest in your business
A few years ago, a number of people in the company began to recognize that Mastercut needed an enterprise resource planning management system to integrate planning, inventory, sales, marketing, finances and such. At first, Mastercut used as add-on software but soon realized it would be easier to start from scratch rather than overhaul a 2001 software package. “We needed something that fit us and the times better,” Shaluly says, so he invested $250,000 in a new ERP.

Be ready for growth
In the late 1990s, when Shaluly's wife, Mia, vice president of Mastercut Tool, first saw their current location, she said, “We're going to get that building.” Shaluly thought she was crazy.
Not too long after, Shaluly saw a GE Capital ad in an airline magazine about small business loans. He was able to consolidate a number of his machinery loans and move in to a new space with little out-of-pocket expenses.

“We were able to get in it before we needed it,” Shaluly says, which was a blessing in disguise because when the company started growing quickly, it had the space. It also was a good move from a marketing perspective because it shows well. “It's not a little shop. It's a factory,” Shaluly says. “My wife turned out to be right.”

Get in touch with local schools
“It's always tough to get qualified people,” Shaluly says. It's one of the reasons the company invests time at job fairs with local high schools, vocational schools and universities.
Mastercut also leads an annual fundraiser to raise money for science, technology, engineering and math, or STEM, education. “We want them knowing about us ... it is important longer term,” Shaluly says.

“Giving back to the educational system ... it's what makes a business community strong,” says Scott Talcott, business development manager at Pinellas Economic Development. Talcott says that Mastercut's involvement in schools has helped develop curriculum for manufacturing careers. “These programs can only get better with input from industry.”

Be willing to adapt
Mastercut opened its European sales office a year ago. Already, the company knows it needs to change strategy to keep growing. It is working now to change pricing to Euros and work on an inventory of Mastercut-branded metric products.
Additionally, Shaluly says the company is “constantly working on innovating new products and new coatings.”

Don't be afraid to promote your own products
Mastercut Tool had always made its money through private label, making products for other company names. In 2005, the company decided to use its brand name to market its industrial products. Since the move to branding the industrial side of the business, Mastercut Tool has seen its sales grow by a factor of three.