David: Welcome to the Manitoba Business Podcast, featuring interviews with business leaders and entrepreneurs based right here in Manitoba. I’m David Noël-Romas. This episode is brought to you by my small business, Black Chair Consulting. We use social media to help businesses sell more. To find out about Black Chair, visit www.blackchair.net.
I’m a bit biased for today’s guest, seeing as he’s a fellow engineer and an all-around great person. However, he also has an incredibly sharp mind for business, and we got to dig into some nuts and bolts tactical stuff, which I always love. The guy is a CFO for one of Winnipeg’s greatest home-grown success stories, and he’s been attached to it from the beginning so he was able to share some really valuable insights with us about the importance of establishing good processes in a business. I really enjoyed our time together and hope you do too. If you do, please tell your friends about the show. The show is available on all your favorite podcast platforms, including iTunes and a transcript of every episode is also available on our website at www.manitobabusinesspodcast.com.
Now, without further ado, here is Mike Linton. So, Mike, thanks so much for taking the time.
Mike: Thanks, David. Thanks for having me.
David: Let’s start by having you tell us who you are and what you do?
Mike: So I’m Mike Linton. I’m the CFO at The Dufresne Group in Winnipeg. I’ve been here…just celebrated my 21st anniversary here.
David: Well, congratulations.
Mike: Thank you very much. I’m an engineer by training. I’m a mechanical engineer and I’m a CA or CPA, CA now is what my designation is. My responsibilities at work, I have responsibilities for finance, IT and real estate, and spend a lot of my time in real estate for our Canadian operations. Our business spans both Canada in the U.S. And so I would be the CFO for both our Canadian and U.S. operations, and so that keeps me committed to my work.
David: No kidding. Very cool. Well, engineers gotta stick together. I like that. I’m also an engineer. So how did you get started with Dufresne?
Mike: So I would have… I joined KPMG in 1987 and Mark Dufresne joined about a year after I did. So him and I, we met each other and we became friends. So Dufresne started the business in 1986. And Mark went on a business plan that Mark wrote up in commerce when he was a commerce student, and he would completed his commerce degree that went to work at KPMG and got his CA designation which at that time required three years of work experience. So when he finished, he moved back to Kenora with the goal of expanding the furniture business. And so he would have got there in 1990 and ’91, he would have made the decision and moved to Winnipeg, opened our first store in Winnipeg in 1992. And in 1996 he had an opportunity to grow the business.
So Palliser was getting out of the furniture business and they owed a business called CA Dufresne at the time. And so they wanted to sell their…they had about seven locations, we ended buying two of them, one on Winnipeg on 1750 Ellice, which is where our store is today and one in Brandon. So as the results of that growth, Mark felt that he needed some extra help on the leadership team, and I would have come on board as I was probably our 40th employee as the CFO at that time. Mark’s family and my family, and the Dufresne family for that matter, are very close and we have remained in contact, we’re close friends. And that’s how the opportunity got created.
David: Very cool. Okay. And so you were coming on in kind of a turning point for the business. What were your first priorities at the beginning there?
Mike: So initially, it was to… So we would have… When the store… When we took over the CA Dufresne stores, we would have grown by 300%.
Mike: So just managing that growth and the explosion of demands on our distribution business and fulfilling those customer orders because I would have spent some time in that, and just solidifying our processes for paying the bills and payroll amongst other things. Like when you’re in that much growth, it just puts additional pressures on the business. So I was just getting us ready for that stage. And the first few years, we grew very rapidly. So we’re kind of almost 100% growth for almost five years in a row, I think we went that. So it was a lot of growth which pushed a lot of pressure on your processes and your systems. And so initially, it was on… It was managing our back office. That ended up probably about 10 or 15 years ago. I no longer have… I had responsibility for distribution for a while. I don’t have responsibility for that. And as the business grow, you get more specialized, so I had a lot more width at the start, and I’m a lot narrower today on what my focusses are.
David: Right, right, right. Okay. How was that growth financed at the beginning?
Mike: So we would have financed that… Our financing partner was Roynat Capital, which is still our partner today. And so we were acquiring real estate and they were partnering with us, and then just primarily through operations, just we reinvested for almost all of our operation, operating results for years we reinvested. So it was… We were committed to growing the business. And when you’re committed to growing the business, you need to reinvest.
David: Totally. You mentioned the real estate side of things. Was that something you had experience in before or was that something you kind of had to pick up and run with?
Mike: So my training is I’m an engineer and I’m an accountant, and as an accountant I was a tax advisor, so I had no real estate experience. So my real estate leasing experience has come primarily through on the job training. And as you do more transactions, you get… I probably have done 75 or 100 lease transactions now, so you get a little more accustomed to the process, you understand what everyone’s looking for. And if you… As I was going, I was trying to get material to read. There’s not a lot that can get you up to speed. From what I can gather that’s the learning from someone else and learning on the job would be the key.
David: Right. That’s one of the fun things about business. There’s a lot of little areas like that where you don’t really find a book on it, you just go out and do it or find someone who did it and then ask them.
Mike: You’re right. That’s exactly right.
David: Very cool. So as the business kind of grew, what were the challenges that you saw growing into the 2000 type thing at that time period?
Mike: So initially, our challenges would have been developing business systems. So we changed our ERP in like 2001. And so redefining your business systems is a…and continue to involve your systems as technology changes. So all along, it’s always been getting the right bit process that can be consistence-defined outcomes. That’s one of our beliefs. And so you’re redefining your process that you’re continuing to get, making sure your process to stay current because you need to be able to gain your productivity. And so process has been key to making our business flow over the years. And you need to reevaluate them all the time because it’s the way you process your accounts payable bills in 1996, it’s not the way you do it in 2017.
And even how you start to reconcile your bank in 1996 is not the way you should do it in 2017. And those are just some examples, but almost every process needs to be reviewed and not all…The furniture space is not the most… We’re not selling rocket ships here. And so lot of the vendors aren’t really… They’re not… A lot of them are smaller than we are. They do not have the technology investments, they’re not able to transact the way you’d like them to. So you have to make do with some of the constraints in the industry as well.
David: Right. Actually, and that reminds me, I fast forward a little bit because I know some things about Dufresne. But for the listeners, can you explain what the different business model actually is? What do you guys do?
Mike: You bet. So, first of all, our core business is Dufresne Furniture & Appliances, which is 13 stores in Manitoba and Northwestern, Ontario. We have two franchises, one in Thunder Bay and one in Ottawa. And in addition to that, we operate stores in the Winnipeg in Northwest, Ontario. That business is currently expanding where we’re gonna open a store in Prince Albert next week, and then we will be opening a store in Saskatoon in early August. So those would be… We acquired a store last year in Steinbach, and so first growth in a long time in that business. That was our initial business. So on the Dufresne side, we are also with this furniture supplier to the northwest company, and we also are the… We also run a buying groups, commercial side where we provide advice to independent retailers across Canada. So we have 133 locations that would sell our Dufresne product, and they would sell that across Canada and they don’t carry the Dufresne name. It’s called the Dufresne Retail Solutions Group. It’s based in Cambridge, Ontario. And so that’s what we call our Dufresne business.
Our Ashley business, it was initially based in Western Canada which we started in 2005. So Ashley came started to roll out their stores, we decided that we had to partner with the… We were either gonna be competing with them or partner with them. So we we’re likely to partner with them. And so we opened our first store in Winnipeg in ’05 and then we continued to roll them out in Western Canada. We kind of finished off our 12 stores in Western Canada by 2010, added another one, and probably in swift current in like 2013. And then in 2015, we got the opportunity to take on the Toronto market for Ashley. So we acquired four stores in Toronto of March of 2015, and we now have 12 there shortly. So that business is now in 24 locations. And that is…we run them, the separate teams in marketing, separate teams and executive teams. They will use the same, what we call, shared services, which is accounting and IT and supply chain and performance center, but they will not…they don’t share the same marketing team as an example of Dufresne.
David: Got you.
Mike: And that’s in Canada, and in the U.S., we operate about 36 Ashley stores and another brand called Stash which is based… our head office in Memphis, Tennessee. And we’re a little bit bigger in the U.S. than we are in Canada. And we got into that business in 2012. And since we got there in 2012 we have tripled the sales. So we initially was Memphis based, we added national shortly thereafter, we have Indianapolis, Louisville, and Lexington, Kentucky, and St. Louis, Missouri. So St. Louis is our biggest… And St. Louis and Toronto would be our two biggest metros that we service. And so we have… We are in what we call the Mid-South is where we’re located. So that makes up our business.
David: Okay. There’s a couple of question that stem from that, and I also wanna go back to something you said before, but in terms of the staff business and tripling the sales, what kind of influence does corporate get to have on that sort of thing? Like from an office in Winnipeg, what sort of influence do you get to have or what steps were you taking to help a chain like that triple their sales?
Mike: So our shared services model, we have an M&A team here in Winnipeg that provides some support, but most of the growth is driven by the leadership team in Memphis.
David: Got you.
Mike: So they will take responsibility. They run the business and we provide sales support.
David: And was that two main places you acquired or do you…?
Mike: Primarily. The CEO is a guy named Chad Spencer and he was there when we got there and he was running the business. And so we’ve helped Chad to put some processes in place to allow for adding on the growth. So we run a specific ERP called stores and that stores ERP, we were to implement that in the U.S., and that’s allowed them to improve their capabilities and the ability to go in and get the job done.
David: Very cool. This is kind of a specific tactical question, but I’m curious. Is stores custom ERP or is it industry specific?
Mike: It’s industry specific. They’re based in New Jersey. They’re not… We’re working with them to improve our… Our industry needs tremendous technology investments and lots of change. Like furniture is still primarily a brick and mortar transaction. Our customers are going online to acquire furniture, but we’re still primarily a brick and mortar, which is good for us. That said, we need to improve or make substantial investments in information technology going forward, and we will do that with stores and with things that are built onto stores as well.
David: Cool. So now that kind of ties into something that I wanted to go back to. In terms of process, you say that it’s important to reevaluate process. And I think especially smaller growing businesses, which is where a lot of the listeners are at, that’s tough. Like, this is gonna sound like a cheeky question, but what’s the process for evaluating your processes?
Mike: Well, so first of all, you need to document them because if you can’t document them, you can’t look at them, you can’t understand them. So documentation is usually where most people start off struggling, because it’s, how do you document them. And so process maps, system narratives, you need that. So if you don’t have that, you can’t start. So we really like the book when we got started, the book, “The E-myth Revisited,” we really liked that book as she’s a basis for how we…when we started off in the mid-90s, we read that book and we believed in that. So that concept is… so first thing first, you got to document them. So then now that you have them documented, you have to have the knowledge of how to change them. And so if you believe in constant and never-ending improvement, then you have to either have to hire the people that can implement the change, or you have to have the people on board already that can go witness the change somewhere else or witness the process somewhere else, or understand what the capabilities are based on their own knowledge to make the change.
That is where the pedal hits the metal because that is the most challenging part. System documentations first, just getting that across the line is challenging and are comp… Because some of our systems are quite complex. So a complex system, and then you need someone to say, “Okay, what’s the waste in this process? What can we eliminate? How can we do this better?” And that requires talented people spending the time to get it done. There are no shortcuts to doing something differently.
David: Sure. One of the things you also touched on when you were talking about the business model with the supply chain. What does that look like? And is that something that Dufresne owns or are you working with external partners there or…?
Mike: Well, we own our own supply chain. All of our distribution centers are operated by us. We believe that we have to own the final mile because the customer only considers…our customer only has two key interactions that they really value. One is with the sales person, the second one is on the delivery, with our driver. Not that they won’t interact with probably three or four other people throughout the process, those the two that they draw their conclusions on us on. So as a result, we don’t believe in using… Like, a lot of our competitors use contracted delivery. We don’t believe that we can hit our better experience concept by using contracted delivery.
Mike: So we own the supply chain all the way, we are prepared to…we use contractors to get it to our doors, but from our doors out to the customer, we have to own that. So we’ll own that process here and we are constantly working on improving that final model, which is all about riding the tracks effectively, making sure that the customer is at home when they say they’re gonna be at home, making sure they’re aware when the delivery is gonna come. So we spend a lot of technology and investment in making sure that the customer is what… A delivery where… The process to prepare a delivery and get it ready to go is time consuming, and then when our product rides around on the truck all day because we deliver…we often deliver what we call a deluxe state. So we’ll open the product, unwrap it because we wanna inspect it and make sure that it’s satisfactory to the customer. And so we’ve inflated it already, now we gotta ride it around the track. If they’re not at home, it is a lot of work to put it back.
You can imagine. And even you bought and you had to un-cart it yourself. So it’s a lot of work to put it back. So we spend a lot of energy on making sure that… And we’re moving now to sending the customer texts, sending them a link in the text so they can click on it and see where the truck is, so they know when it’s gonna be at their house. Because it’s very difficult… Because we wanna book you at the time of sale, but it’s very difficult to tell you that two weeks out that we’re gonna be there at 9:45 a.m. And so we give you a window at that time and now…but people are busy, so you gotta get that window narrow and so we’re trying to do that through technology, and that would be a focus of ours on a supply chain piece.
As far as the inbound and in stock, those are… We have some systems that we constantly work on making sure the product gets here when we want because we wanna make sure that we can fulfill the guest as fast as possible. We believe that speed to guest is one of our critical success factors. So we’re constantly working on that which results in… we used to bring our goods in by train from the U.S., we now bring them on…we now go get it with a vehicle because that improves the time considerably. And we book the guests at the point of sale, and that allows us to not have to reach out to you again to book as it takes the layout. So we’re trying to find all the waste in that process and eliminate it so we can get it to you as quickly as we can.
David: Very cool. I’m conscious of the time and I don’t wanna go over. So I have two more questions for you, I think. Well, two and a half. The first one is, are you a reader? And if so, which… This is why it’s kind of one and a half questions. If you are a reader, which books would you recommend to the listeners?
Mike: Right now, I would say that I am not… I’ll get most of my knowledge, I read the Wall Street Journal every day, I read the Global Mail every day, every Bloomberg every day. So I’m a finance guy, so I kinda tend to focus there. So my interest today would be on Trump because Trumps has threatened an import tax. So an import tax… A lot of our goods come to us, they come from Asia into the U.S. to us. So that is something that we are very…because we can’t afford to have that tax right on top of our goods if we’re gonna… So we’ve been working on… So that is a really relevant reading to us. And so that would be…
And frankly, I can’t say the name, but I’m reading a book right now on accounting processes. So accounting processes right now seem to be driven by Australians and New Zealanders. And so what I’m interested right now is improving our finance function and getting out of the kind of delivering financial statements in Excel format that are line after line after line to our users, and rather delivering more of a graphical interface that is a little more timely, gives a little more analysis. So that would be my focus. I can’t say the name of the book right now, but that would be where my interest lie, is delivering a better financial product to our users that people can make better decisions more timely.
David: Cool. Final question. Who are the people that have influenced your approach to business, whether they’re people that you know personally or people that you’ve kind of admired from the far?
Mike: Okay. So first of all, you’re an engineer and I’m an engineer, so I’ll say that the faculty of engineering taught me how to work.
David: Sure, yeah. I’ll agree with that.
Mike: So up until that point, so whenever someone asks me what I use my engineering for, I would say, “Well, that’s why I learned about effort.” And, you know, the harder you work, the luckier you get. And so I believe that a lot of that came from there. In business, I get a lot from Mark Dufresne. He’s a very bright guy, his math skills are amazing, and he is very creative. And so I just find he comes up with creative solutions. So his energy level and his enthusiasm, I get a lot from him. And then I’ll say just a lot of people over the years I’ve gleaned a lot of things from whether it’s Wayne Demkey who used to be the CFO. And I think he has now at full form, just his outlook and his simplistic communication style, and what I would learn from working from him to Greg Weib[SP] who’s was my boss when I was a tax guy, and his outlook on life and his expectations for what he expected for you as someone working for him. There’s lots of people who have had influence on me. And even some of the people I work with today and what they bring it to the table. I’m always inspired.
David: Cool. Well, Mike, thanks so much for your time. I really appreciate it.
Mike: Thanks very much, David.