Imagine a sheet metal prototype shop that was so fast and reliable it never turned down a job if it were physically possible to complete and the customers were willing to pay the price.
My guest today, Jay Jacobs, built his former company RAPID from a team of five to over 300. Before being acquired by a publicly traded company for a price he couldn’t refuse, RAPID was manufacturing over 30,000 unique part numbers annually, 24-7-365 days a year.
Then Jay co-founded Paperless Parts, a cloud based estimating and quoting software platform.
On today’s show, Jay is going to tell us how he scaled his company and how a job shop can make bold delivery promises like Domino’s Pizza.
Disclaimer, I didn’t say the parts tasted good.
Jay also hosts an excellent podcast called the Job Shop Show
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Disrupting the Sheet Metal Prototyping Industry
Jay Jacobs got a degree as a mechanical engineer but never practiced. He did sales and marketing in OEM manufacturing. Then he worked for a prototype shop 1989 where he bought one of the first ever 3D printers on the market.
When he later worked as a manufacturer’s rep, he realized the prototypes with the longest lead times were sheet metal parts.
He scraped together most of the money he had and bought a five-man sheet metal prototyping shop doing $150,000 in revenue. His company, RAPID Manufacturing, disrupted the sheet metal prototyping industry by promising quotes to customers within 24 hours and delivering parts in one to two weeks.
Jay says before RAPID, sheet metal prototype companies asked customers to them send part prints, however his company required customers to send in 3D CAD data. This sped up the company’s lead times because it cut the engineering process before production. Another difference from other sheet metal prototype shops of the time was that RAPID welcomed customers to request one-offs, while other shops discouraged such requests. They made customers wait several weeks to get around to making their low volume parts, which they deemed less profitable.
Jay took says he adopted the methodology of a 3D printing service that customers want quantities of one, they want them fast, and price often isn’t an issue.
Scaling RAPID Manufacturing
Jay says that for a long time he had trouble delegating the business’s day to day tasks such as quoting jobs.
He felt like his quotes were “perfect,” anticipating everything the customers could think of. But the company’s volume of orders kept increasing, sometimes 50% per year. So in order to scale the business and still fulfill his 24 hour quote guarantee, he had to allow himself to let go of some hands-on tasks and trust that his employees could do the job well enough. By delegating, he was able to focus on company culture. He used his time training employees and spent one on one time with them. His mission was to create a company where employees were not afraid to make mistakes when they were trying out innovative ideas.
RAPID grew at an average rate of 32% from 2010 to 2017 annually. Jay made a lot of personal sacrifices to scale the company. He says in retrospect he would have been good with 30% growth if it meant spending more time with his family. But at the time, he was so passionate about growing his company and disrupting an industry that it consumed a significant amount of his attention. He says he struggled with how he allocated his time. Sometimes he felt like if he wasn’t working, he was “cheating on the company.” But he is grateful that he sometimes was able to get himself out of the shop to be with his family.
In 2017, Protolabs, one of RAPID’s customers asked to buy the company. Jay asked for an absurd amount of money, 10-12 times EBITDA, and Protolabs agreed. Normally companies sell for between 3-5 times EBITDA. Negotiations were complicated in the deal concerning the proprietary technology that Jay wanted to incorporate for his new company, Paperless Parts, which he co-founded with four partners. The company provides a cloud-based software platform for streamlining parts quoting.
As much as Jay loved running RAPID, he says that selling the company enabled him to help create Paperless Parts in a way that had a much larger impact on American manufacturers. He says if he were still running RAPID, Paperless Parts would have been more self-serving.
Stay tuned for Part II of the Interview, in which Jay discusses more about Paperless Parts and gives advice on pricing jobs.
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