Automation, Machining, and a Coal Mine: What Vertical Integration Buys You | Ep. 51

[0:00] You know, one of the things that stood out the first time we talked is you were just kind of like lamenting the stresses of being such a busy entrepreneur. And I remember at one point you were like, man, I’ve been broke, I’ve been rich, I’ve been double broke, I’ve been way richer than I was the first time, like that roller coaster that is being an entrepreneur. Let’s speak to that for a minute, just kind of the personal side and how you manage that as a leader and how you kind of stay level-headed when you’re on a roller coaster in the middle of a tornado.

[0:41] Hello folks, and welcome back to yet another episode of the Lights Out Podcast with your hosts Dave, Nick, and Eric. And today we’ve got a really special episode because we have with us Michael McHale, industrial automation integration extraordinaire with us today. And we’re going to be talking a lot about industrial automation, where it goes wrong, and Mike’s just a wealth of knowledge on the subject.

And so we’re excited to be talking with him today. Michael, thanks so much for joining us. Good morning guys.

Good morning, Dave. That’s a, uh, that’s a, that’s a pretty, uh, heavy introduction to, uh, not fail here. Well, I think he lightened it up a little bit because Mike, you do like 10 things.

I mean, the last time we did a little interview before the actual recorded interview, and I think you, you have all the jobs. The records show that I actually asked them to put your height, weight, and record, uh, in that introduction too, and they opted not to. That’s okay.

I appreciate that, Eric. But you know, yeah, we, we do a lot of things at PSA, but in reality, it’s all based around engineering and fabrication and machining. You know, it, we’re basically an industrial just like most automation companies.

We just, we, we delve into some of the hard manufacturing things a little more than some of the automation companies out there. Awesome. Well, Michael, you know, that we’re all about trying to equip the metal working nation, the machine shop world with information and advice on how to kind of pursue lights out automation, or even just running in a semi-automated way.

I’d have to imagine through PSA, I mean, you’ve seen your fair share of automation projects and we’ve heard, you know, the stats that robot orders, automation projects, they’re, they’re climbing in, in number, you know, right off the hop. What are you seeing in 2026, just in terms of, you know, a general push from, from industry to be adopting automation? Yeah. I mean, this year has been strong for, for, for the industry and for PSA.

You know, a lot of companies are looking for cost savings and replacing headcount that they can’t hire. You know, a lot of people, and we have this conversation a lot about what happens to all the people that are being replaced by robotic systems we’re putting in. We’re not actually seeing that.

We’re seeing those people being shuffled to other parts of the plant that are hard to employ projects. And we’re really replacing very difficult people based work, you know, picking up 50 pound bags, picking up high-speed little things. They’re very difficult for a human to do, but it’s easy for a robot and a vision system to do.

So that that’s what we’re seeing most of, you know, our return on investments on most of our projects are between two and three years. And sometimes we do have projects that are one year ROI. It all depends on, on the installation and the opportunity.

We’re seeing a lot of companies, you know, from mid-size to large jumping into an automation in a big way. You know, they are getting pressure from investors, boards, shareholders, call it what you, you know, stakeholders in the business that they need to start looking for automation because it is the buzz. And we’re definitely seeing that.

Yep. Just like what we always say with you know, everyone worries about the robots taking their jobs, but I’m more worried about people doing a job that a robot should be doing, something that’s dangerous or repetitive or monotonous. Yeah.

You know, by automating you’re making that company more successful, thus allowing them to take care of their employees a little bit more. So I think, you know, that’s shortcuts in both directions. Yeah.

Isn’t it eliminating some, some workforce? It probably is eliminating some workforce and those repetitive project, repetitive jobs. But when you look at the overall, I think it’s actually adding because now when you do that and put an automation project in, you can’t forget about maintenance and your skillset in your clients have to go up. You need PLC programmers.

You need people to troubleshoot, to touch up robot programs. You know, it’s, it’s, these aren’t install the system and hit the green button and it goes forever. If your products change, your labels change, your vision instructions change, well, you need to do some of that work on site.

And, you know, so you are, we’re seeing, you know, the addition of maintenance staff. So skilled, skilled staff, you know, and I look at it in the sense of PSA, our skilled staff is growing every day from engineering to CNC operators, to fabricators, you know, we’re, we’re continually adding staff to keep up with the demand. That’s one of the things that jumped out the most when we first talked is, you know, we always see like automation people who go into machine shops and of course they know something about it.

That’s their main customer segment. And then there’s, you know, machine shop people who try to implement automation, but you’re one of the few who truly has both businesses. You do both businesses.

So I think, you know, it a bit more intimately than, you know, the average automation person. Yeah. I’ll be honest with you, Nick.

Our machine shop grew organically as our customer base grew and it grew with the automation business. Now, and now we’re just transitioning into being a machine shop, like a, like a standard machine shop. So our first automation in machine shop was within the last couple of months.

And we’re continuing to add now that we’re, we’re actually concentrating on machining as a core business segment. And it’s probably something that I overlooked, um, as the business was growing, we probably should have paid more attention to it. And there was more opportunity.

And, you know, I’m not exactly sure if the hockey stick opportunity is what’s happening in the next five years and the re-industrialization of the U.S. is driving the business, but you know, five, six years ago, I don’t know if I saw this much machine shop activity. We’re seeing a lot of retirements in the space, which is driving work to us. And we’re picking up clients organically that way, which is good for PSA, but not, not very good for overall industry.

Yeah. The silver tsunami, all these, uh, you know, boomers who are retiring from their machine shop business that they own, they probably in most cases don’t have a succession plan and that work’s got to go somewhere. Some of it needs to get automated because the labor is not what it once was.

So there’s a lot of acquisitions happening right now. And that’s probably what you’re pointing to with that last comment. Yeah.

Yeah. Well, you know, I think you go back to the machine shops, you know, shops that are under 10 employees are very difficult to transact on. You can’t really add them into another business as a rollup.

They’re not scalable enough to run on their own because they’re typically owner run and operate it. Unless there’s somebody internal with staff or somebody in that local area that wants that machine shop, that’s a very difficult transaction to be had. So I think in some areas, end users are going to lose the opportunities for the machine shops as we consolidate down.

And, you know, I, I also, it’s partly an arms race. You really need a lot of capital to play in this game. You know, our new DVF that we just bought, heck, by the time we were done fitting it out, it was $800,000.

[7:48] And that’s not even on the floor yet. Now we still have to do concrete work and electrical work and other things, probably another $100,000. You know, it’s an end startup cost.

You’re a million dollars into that machine before you can even start making a dollar. And then, you know, it’s hard to line up work when the lead time on your machine is five, six months. So, you know, that’s going to separate a lot of the business because of that capital investment.

A lot of these smaller machine shops, a million dollars is the total of all of their equipment, let alone just one piece of equipment. No, exactly. And it’s that particular type of machine that’s just like flying off the shelves right now.

These five axis mills. It seems like the country can’t import enough of them. Yeah.

Well, you know, we were lucky to secure one for this year. If we didn’t secure that one, I think the next one was like seven months from now. You know, so you really have to be thinking, you have to be thinking ahead.

You know, we bought that, we bought this machine to transition some work into, but also to sell into next year. So you’re making a commitment six, seven months before you actually have work to put in the machine. And then think about that, that up ramp of that revenue generation, it’s going to be very difficult.

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So you’re a customer of ours, you bought a workflow for that DVF 5000. And just in our shoes, with those being the lead times, it’s not just that builder, other builders are struggling to get that equipment here. It’s really hard for me to sell an automation system that attaches to that kind of machine when we can’t get those machines in the country for, like you said, sometimes seven, eight months.

[10:08] But I think there’s a tremendous opportunity to retrofit too. Like a lot of people buy machines that they can then automate later, and they don’t really think of it as an option. But just automating the machines you already have in your shop, and that’s something you’ve been helping your customers with for a long time.

[10:27] Yeah, that’s definitely an opportunity. And you really have to think outside the box if you want to compete in what the new emerging market is. The other thing that I think is going to drive a market segment into a direction is the quality demands and the tolerance demands of these customers is so high that your 15, 20 year old mill probably can’t get there, or have a very difficult time on repeatability getting there.

So it is going to separate. It’s going to separate who’s producing and who can handle certain clients. And an arms race is, and if you think about automation, just robotic automation in general, if Dave has a product, and Eric has a product, and Nick has a product, and it’s the same product, and you’re selling to the same marketplace, he who drives their cost down first wins.

[11:23] And that’s sort of how the machine shop game’s going to run. That would probably be me in that scenario. I just pointed that out.

[11:35] I’d put my hundred bucks on you, Eric. Thank you, Michael. But you know, what Nick said and what you’re talking to is a really interesting topic to me, and it’s something that we run up against, right? Like that difference between getting the spindle to feed now versus having the patience to play the long game and wait, you know, hey, we’re going to pass on some of this work to bring it in right, to bring it in with the pallet pool, looking ahead into 2027.

Like that seems like a very nuanced game to play. I mean, is that, do you find that to be a really incredibly hard balancing act sometimes just between shipping now versus investing in the future? I think for us and for me, you know, our entire, the entire run of PSA is about 20 years from now. So we built the team and built the business around not chasing an EBITDA for the first 10 years as we grew out, but chasing what the long-term game is going to be.

If you’re chasing an EBITDA short-term because you’re looking to sell your business and that’s fine, but these businesses take years to develop and it takes tremendous amounts of capital to develop into what would be considered an industrial business. And if you’re not using all those resources and thinking 36 months, five years, you know, we we’ve always run with a five-year plan of where we want to be, what size, what type of buildings we want to be. And every year we revisit that, you know, and machining was never really part of that core business.

It was always just, Hey, was, was over there. We’re doing seven, 8 million bucks a year in machining. We didn’t even really know what we were doing or why we were doing it, but now we’re focusing on it.

And I think it’s because of the business opportunity that you’re seeing in 27, 28, 29, 30. It’s not because of what we saw in 2016 or 2018, it’s what you’re seeing in 2030. And that capital commitment is really for a 2028, 2029, 2030.

And before you’re really probably reaped the rewards of that investment. So the size and scale of the business drives where you can go. You can have the best plan, but if you don’t have the capital to support that plan, you’re going to be in trouble.

[13:54] Michael, I’m, I’m curious when you’re having a conversation with a customer who wants to invest in automation, are you having that conversation with them? Like, is this an immediate need you’re trying to solve or, or is it for the future? Are you trying to kind of guide them towards that longer term thinking for how they’re going to be investing in, in automation? That’s a complicated answer in the sense that some customers call us and say, Hey, we need to automate this thing. And you price that thing. Then we have some customers say, come to our plant and give us an automation assessment.

And then you’ll look at 10 opportunities. And then you do a quick, okay, this is a million dollar opportunity. This is a million dollar cost.

[14:31] And what’s your ROI? How much are you saving? You know, unfortunately in US business versus European business, automation is much more forefront. You look at Japan, look at China, look at, look at Europe. Their automation is, is out there because their, their look at our return on investment is much longer than ours.

When you talk to a C-suite, the C-suite wants to see in definitely an under three year ROI, most likely a two year ROI or OSHA or an injury related issue that can drive that ROI up. So, you know, at some point facilities are going to run out of the two year ROI opportunities. And the only thing that’s going to be left is under five.

And you’re going to have to say, Hey, I’m committing the automation for 10 years. I think where a lot of us, you know, as the market changes, your products change, you’ve come up with new things. How can you make that automation flexible enough to handle 10 years, 15 years of automation or growth in your business? And I think that’s where a lot of, a lot of companies struggle.

You know, we struggle with it as well. It’s not, you know, when you’re trying to make decisions for 2030, how do we know what that marketplace is going to look like? And you’re gambling on it. Yeah.

Yeah. The American culture doesn’t really help with like decade long thinking. We want instant results here.

Eric and I were just in Switzerland and we were with our buddy Risto from Finland. He’s a leader at Fastoms. I’m sure you’re familiar with Fastoms, the, you know, pallet automation, the tombstone automation, really tooling automation, everything.

They’re, they’re doing crazy stuff there. You know, they, he, he said, he’s like, honestly, don’t be offended, but you’re probably 20, maybe 30 years behind the way Europeans think about automation. And I was like, wouldn’t offend me.

So it’s a great opportunity for a guy who’s in the automation business. So. Yeah, I think you’re right, Nick.

Our, our, our mentality will be changing and it’s going to have to change and you’re going to have to adapt to, you know, robotics vision and AI. And if you’re not adapting, you will fall behind. I think this, this silver tsunami that we talked about earlier, probably accelerates with AI.

You know, we’re now, we’ve been doing AI programming and, you know, we’re running, we’re rolling out IBM Watson into the company as our AI platform company-wide. So our first three agents are done and we’re keeping generating agents. You know, I don’t see that.

That’s not eliminating staff, but what it’s doing is helping the staff work better and control the business better. Older shops aren’t going to be looking at this. They’re going to be left behind in very many ways.

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See what your website has to say at navoo.co slash makingchips. That’s n-a-v-u dot c-o slash makingchips. Does IBM Watson roll out this walk us through that journey of like kind of what triggered it? Did you see a cool commercial when you were watching football? I didn’t see the ad and say, damn, I think this is a great idea.

[18:42] We have an executive coach that helps the business, and we do all of our training, and seven habits training, and executive training, and a million things for the employees. And he got introduced to an IBM Watson integrator that I met with a couple of times. And really what we were trying to do is automate our workflow.

We had started with project management, so we hired a consultant to come in to help us outline what project management is supposed to be inside of PSA. Took six months of a five-person staff, probably four hours a week to put together a flowchart of our entire project management life cycle, which was great. So now we had this giant document, and we had a written, we had a flowchart, we had a written document.

Now we’re like, okay, what the hell do we do with this document? And it was all about how do we make our projects run faster, better? How do we teach new project managers? How do we run projects? How do we tell customers? What’s our front facing? What are we selling? And that led us into a meeting with the IBM Watson integrator, and it sort of sparked, like, we had everything we needed for our first agent. And that’s what kicked it off. We knew we needed something inside of the business, and it started with a project management agent.

And it was really just, hey, I go into my chat inside of Microsoft Teams, and I say, hey, I just got a new PO, what am I supposed to do? And it tells you the five steps you’re supposed to do for a new PO. So then that led into how do we force, how do we take that static agent into an active agent? We’re in the process of migrating all of our project management documentation, so Excel, Smartsheet, you know, anything that might have been a static document into Jura workflow, that an agent can now interact inside of Jura with that. So we’re rolling out a fully integrated PM agent, as well as a work in progress accounting agent inside of our ERP system.

[20:37] Is this customer projects or internal projects, like things you’re trying to accomplish within PSA or things you’re doing for your customers? This is going to be external. Well, it’s both. So we run our internal projects like this, and we run external projects through this system.

[20:52] So the idea here is, you know, project manager, I’m running, you know, four jobs, and I have to do meeting minutes, and I need to do follow up. Well, the agent can now help you, hey, you know, you need to follow up on these three things in this project. Or the project manager can hop in the agent and say, hey, can you give me a cost accounting for this project without going into ERP and pulling hours and doing manual manipulation.

It’s really to drive and help the efficiency of the project managers. But, you know, I think more importantly, we’re going to be driving this up into the sales channel with our customers to say, hey, you know, you want to hire PSA because this is how we manage our projects. This is how we can go into the agent, and the agent over time is going to learn, you know, okay, we always make this mistake on these jobs.

Don’t make this mistake again. We’re hoping to learn from this agent rollout. Now, I think it’s important.

We are not taking the agent and working backwards. We’re really taking the agent and working forwards. So we’re developing our new workflow.

At some point, old PSA, you know, theoretically goes away, and we start new PSA going into the future. So I don’t think you’re going to see real value to those agents for, you know, a year, two years. Well, it learns how you run projects, and that’s a long-term commitment.

So become a digital company is important to us because that allows us to now, I have a smart sheet schedule in one project and another smart sheet. Well, okay, this project just slid a month because of a delivery or something didn’t work. How does that affect my manpower on my other jobs? Now your agent can overlap that.

And we’re going to be driving that into the machine shop over time and developing our own internal, you know, workflow in the machine shop. You know, what’s so cool about that is like so many people and myself included are proponents of going paperless and eliminating tribal knowledge and eliminating paper records and stuff like this and digitizing everything. And there’s still so many businesses that are really behind the eight ball on that.

But now, you know, in addition to being a better business management system, you’ve also got kind of this on the line that you want to be feeding that data into your AI agent so that you can kind of reap that reward in the future and be able to keep up with, you know, the early adopters such as yourself who maybe are a bit ahead of the game. So, you know, maybe just a note to all of our listeners that if that’s something you’re thinking about, you know, don’t delay any further, like now’s the time. Yeah, I think, you know, Dave, to that, you need to be researching what you want your business to look like five years, 10 years from now.

This is a multi-hundred thousand dollar adventure that we’re going down on this AI. So if it fails, it really sucks because it’s not only paying for all the Watson development and paying for all that integration time, it’s the internal staff time that’s taking away from projects. You’re going to see this reward in spades 36 to 60 months from now.

You’re not going to see that reward 12 months from now. So you need to stick with it. And it’s just like automation.

You’re going to buy a system for a machine shop. You’re going to see some value in the first month, but the real value is in year two and three and four, when you really learn how, what parts to run, how you should run it, where do I get most value? It’s a continual learning process. And I think that’s where our industry, robotics, automation, machining, we’re not like an accounting business or a law firm where we’re doing the same thing every day.

We’re changing every day, every minute, every month. And we continually have to adapt. So to think that what you’re doing today is what you’re going to be doing 12 months from now or 24 months from now is probably a misconception.

[24:35] You know, if you’re not growing, you’re dying. You know, one of my mentors used to tell me, and I never quite grasped it. Now I do, you know, if you’re not looking at five, 10 out, you’re probably going to get run over by the rest of her adopting faster. Yeah. Nothing’s standing still. And if you’re standing still, then you’re actually moving backwards. Yeah. Yeah. And the pace of play, you know, if you told me a year ago, we’d be working on my IBM Watson AI rollout, I would have told you, you were smoking some really funny stuff.

[25:03] It just, I would have never, it was not on the bingo card that we would be doing this at this level. You know, I knew we were going to be doing some sort of cloud integration or co-pilot. We’ve been using those types of things for a long time, but that’s not really enterprise.

This is setting the guardrails of enterprise for the company into the future. And then as we roll new businesses in, and we have new business units, the units that spawn on a PSA, the background of our agents are there and the background of project management is in place. That’s our long-term goal.

[25:33] You know, as, as you’re talking, I’m thinking about our business. And so, you know, Eric and I are working on selling those workflows to customers like you and then Dave’s with Slytech, you know, doing the tool optimization stuff. And they require similar resources in terms of like installation and who you have to deploy when you get a customer and it takes time and it takes people and it takes a certain type of person who’s good at certain types of things. And as you were talking about, like your project management agent kind of knowing, okay, if I’ve got these people deployed on this job, then they’re no longer available. So how do I handle this job too? And what about this job coming up and this job coming up? And Eric and Dave, like, I’m just thinking about as our businesses continue to scale, who’s raising their hand to figure out how to manage this as well as an AI agent could. Cause I’m not, it’s going to be complicated.

[26:26] Yeah. You know, our installs are very complicated because sometimes we’re doing the installs physically. Sometimes we have contractors.

So then you might have electricians, riggers, millwrights. You’re trying to- It’s not just internal resources. You’ve got like some contingent resources that you have to project manage too.

And there your control goes away a little bit cause they’re not your people. Yeah. Yeah.

And who who’s, who’s missing, who’s sick, who can’t go, you know, any small business is complicated. And as you scale, the complication doesn’t go away. It just shifts into new different things.

You know, if you needed one install person five years ago, well, five years from now, you probably need 10. Well, you’re right. Those skill sets are not duplicatable and you need to grow that skill.

So you’ve got to be thinking, you know, we’re constantly growing and promoting from internal to help that process is to learn the PSA way, you know, so, so the seven habits training and all the training that we do along with the agent is to hopefully drive what we want to be as a company in the future. Hey, it’s Paul from Making Chips. If you’ve been burned by recruiters who don’t understand manufacturing, you are not alone.

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[27:54] Learn more at makingchips.com slash hire. So, Mike, what do you say to what I would imagine is happening with the audience hearing about this six figure, multiple six figure rollout of IBM Watson and enterprise level AI solutions. And then, you know, we’ve got kind of a DIY community in the metalworking nation.

People are always like, I can do some pretty dangerous stuff with my chat GPT and my clod. What if I could just make this all myself? So how would you respond to when people could do things themselves with a $300 a year premium account to whatever versus jump in with both feet, get an IBM Watson level enterprise rollout thing going? Yeah, dovetail on that, Dave, yeah. I think you could also apply that to like physical automation on the shop floor as well, because I’m sure you’ve seen DIY projects go wrong, Michael, and possibly some that went well too.

So maybe you could cover both those. Yeah. I mean, listen, this is complicated.

I think, I mean, I still run clod background for me, for my projects and things that I do, right? So I think for a small shop that doesn’t need to be enterprise, you can absolutely do it through clod or grok, or you can figure it out. The issue there is I find that, that my agent, my clod agent goes a little rogue on me. And when I’m, I have projects inside a clod that I’m working on, I find that it starts to intermingle my conversations and it messes up, it messes up where I’m at and what I’m doing.

And then I might just ask a random question that I want an answer for. And now it’s interjecting a project into my agent and I don’t know how to fix that problem. Right.

So I think for an enterprise, for a small shop, you can absolutely do it. I think for enterprise to be able to put guardrails so that the agents aren’t going rogue, you don’t have employees posting private data into the, into the worldwide web is important, right? That’s, that’s another thing for us. We are a Department of Defense contractor and we hold a lot of IP for our customers.

We can’t just be loading things in the clod and having it hit the general internet. So by actually putting those guardrails in with Watson, we can control where that data goes and how the data flows. It may not, might not be as interactive as a clod, but over time it’ll learn our business, not learn something on the internet.

[30:32] And I think that’s the difference. You know, if you’re loading drawings that are CUI into clod, you have a real problem at some point in the future, where if we can do that inside of Watson and Microsoft and we know we’re on GovCloud and we’re protected on the cloud and we have this, we have the guardrails that keep that data internal to PSA and we own the data, we’re in good shape. So I think that’s what you have to look at if you’re a small shop versus the big shop, just what do you want to use it for.

And do I think IBM Watson rollout for a shop with 15 or 20 people is probably valuable? I probably don’t. I think there’s other, you know, pro shop and other things that are out there that you can use that can run your business. Our business is a little more dynamic and we need it for more things.

I think you got to look internal to yourself and say, where do I want to be in five years, 10 years? What do I need this to do? You can probably do it in clod or grok. If you’re, you know, there’s a lot of guys inside the machining world that are super intelligent and super smart and they can figure it out and they can build a tool that fits their business. We just couldn’t do that.

[31:38] You know, a question for you, Michael, cause you, you brought up the cybersecurity compliance stuff. I mean, if you’re a smaller shop and you’re working in the regulated industries, like, do you have any suggestions for the listeners if they want to implement AI in a way that’s compliant, any resources that you’ve come across that would be helpful to some folks? To be honest with you, we have not delved into running any of our government work with Watson yet. That is a next step in the next integration in a next level.

[32:14] So I think it’s hard, you know, and a lot of shops have probably not really following CMMC properly. And now with the pause in it, now nobody really knows what to do. So we are cleaning up and doing a RIAD and a bar of CMMC because, you know, we have contracts and we think we need to do it, but it’s very confusing.

I think everybody individually has to look at that and decide how far they want to go with that and how far do they think their customers are going to be looking at them. You know, we were one of the first green rated companies for General Dynamics five years ago. So we’ve been on this journey for a long time and we’ve spent a lot of money and it’s a lot of aggravation to be honest with you.

[32:51] So it complicates your business, especially if you’re doing commercial as well as controlled in the same shop or in the same business. It’s very difficult. So Mike, you have been talking a little bit about the difference between small shops and big shops and you’ve been a part of all of the above.

And I think it might be kind of cool to go back and kind of tell the journey a little bit so people can understand your perspective of who we’re listening to in this episode. It started with like a control panel company or something like that. When was that? Yeah.

So in 2016, May of 2016, I purchased Production Systems Automation. So it’s still the company name today. We had one office in Aston, PA, which is outside of Philly.

And we had four employees. We did about $900,000 in revenue that first year. Today, you know, we have two locations.

We did close that Aston office because it was just too small this year. Today we’re 100 employees and we do over 30 million. We’ve grown a couple of verticals inside the business, an automation robotics vertical, contract manufacturing vertical, and a machine shop vertical inside the business.

And then we have our Department of Defense work that sort of splits off. That’s experimental ammunition and drones. So is there basically like five business units under one umbrella then? Yes, there’s five, but they all interact.

Automation uses the machine shop. Automation uses the fab shop. You know, we interact engineering across all the borders.

So we have 65 engineers. So we’re putting on a lot of engineering on a daily basis. So we cover electrical engineering, mechanical engineering, hardware engineering, software engineering, QAQC, GDT control.

I mean, you name it, we sort of do it in-house. So we are one stop for our customers. In most machines, when they come through the door, if we’re building an automation machine for you, we’re controlling engineering right through fabrication.

Fabrication into machining, to powder coat, to paint, to assembly, to deployment. You know, your drawings don’t leave our building. And that’s, you know, we do run down, we try to sell that as a service.

[34:52] Your information is controlled inside of PSA’s umbrella. Yeah. So if someone were to say, well, it’s easy for you to say, Mike.

I mean, you’ve got all these businesses that support each other. You know, my normal job shop can’t do that. I mean, maybe you would point to, well, that’s what you did intentionally.

You built it intentionally. We built the verticals intentionally. You know, as our automation grew, we needed more machining.

[35:16] As we had more deployments, we needed more service repair. You know, it sort of, it grew. You know, a lot of automation shops, like even when I bought PSA, most integrators were not vertically integrated.

Most of them today still are not vertically integrated. I just saw the need to be vertically integrated for speed, for cost control. And honestly, automation’s hard.

[35:41] So you tend to make 30% of the parts twice or three times to get that automation right. And if you have to contract that out, you’re paying commercial rates versus our internal rates. And that drives up our costs, internal to PSA and then, you know, external to our customers.

[35:57] So this is all, you know, in a guise to be faster, faster, better, more accurate. You know, Michael, you’ve got an engineering background. Is that, is that right? Yes.

Yeah. I’m mechanical engineer. And, and with that, you know, I’m really getting the sense you’re, you’re a bit of a systems thinker and that’s really played a pretty large role in how you’ve, you’ve built the business.

Would you say that’s the case? No, I would actually say that we kept our eyes open and we really just watched where the market was demanding us to go. I don’t think that I’m some brilliant business person. It was sort of have a conversation when a customer says, I need, I’m missing this.

We’ll try to solve that problem. And you can’t have your blinders on in business. If you want to be a CEO and you want your business to grow, you better, you better have no blinders on.

And when I advise, you know, younger, younger entrepreneurs, even today, I don’t say no to a meeting typically, unless I think that meeting is totally useless to me. I never know what I’m going to learn, what I’m going to find, what opportunities may lie, whether it’s a coffee, whether it’s a phone call, whether it’s an email, that interaction is valuable. And some of the most valuable things that we’ve, we’ve stumbled upon were because I answered the phone, we answered an email, you know, from a customer or from a vendor.

And if you have your blinders on, you just say, hey, today I’m going to make X, Y, Z part. And Nick calls you up and say, I got this opportunity. I need you to subcontract, you know, $10 million a year of work.

And you didn’t answer that call. Well, then you lost that opportunity. It fell, it fell on the next person that picked up the phone.

[37:34] So, you know, you do waste a lot of time, but I think over time you find those opportunities. Yeah. I would imagine the discernment strengthens as well.

Like knowing when this is a nothing burger or a waste of time or shiny object versus maybe we ought to pursue this. There’s really something here. I know a little bit more about your story because yeah, we had that, that first conversation, but to me, you know, a machine shop and automation company, a fab shop, they all fit together, but there’s a couple more things that you’ve got going on that seem on the surface to be like outliers.

Like why, why is he into those businesses? Do you want to speak about the, the coal mine stuff and the bottling stuff too, or? Yeah, I mean, we’ll talk about the coal mine. So we’ve entered a contract and we’re buying a coal mine to actually reclaim coal and sell carbon. You know, on the surface, it just seems like why is Mike buying a mining company? But in reality, it fits inside of PSA’s strengths.

[38:34] We have to build a $50 million processing plant. We have to run operations. We need to maintain equipment.

We have to fix broken things for the next 20 years at that plant. Well, it’s all internal to PSA. Our customers come to us to fix all those things for them.

Well, now we’re running our operations. We’re controlling, you know, $30 million worth of iron and a $50 million processing plant. That’s a tremendous amount of fabrication, replacement, turnarounds that you need to do on that equipment.

Now we have it all internal. So when something breaks, I don’t have to wait 24, 48, 72 hours for a service person to come out to pull a shaft and machine a shaft. We pull it out, we take it to the shop, we machine it, we put it back in.

We’re up and running in four hours, where the next person is five days, seven days, 10 days. That’s where the strength of PSA and using our resources to drive that growth. And, you know, just from an engineering standpoint, we need mechanical engineers and electrical engineers, and it’s an automated system.

[39:34] That’s all internal to us. You might look at it as not automation or machining, but in reality, it is automation, it is machining. It has the same PLCs that we put in your robot systems.

This just happens to be a processing plant. It’s another one of those, you know, keep your eyes open. Well, there’s going to be $10 million of repair that that plant and that equipment needs a year.

Well, why do I want Nick or Dave or Eric to have that $10 million? We don’t deserve it, Mike. You deserve it. Well, no, but you might not even be able to find it.

[40:06] You might have a struggle finding it. Exactly. Now it’s internal to PSA, and now we can control it internally.

So that also helps us with our revenue spikes and dips, you know, being in the capital markets like we are, you know, and we all know whether you’re in machine shop or automation, you’re chasing the capital markets, you’re chasing a customer, you’re chasing a bid, and it’s difficult. And this helps flatten those curves. Yeah.

I love that, like in the coal mining or the bottling opportunities, like, yeah, those industries aren’t selling automation. You know, you’re selling raw material, you’re selling coal or whatever, however you make money in that business. But the way that you become elite in that industry is through how you’re already vertically integrated with the service and repair, the machining, the automation.

That’s like what that business would need to invest in to get to the next level. You have all those things, and therefore what would appear on the surface as kind of a distraction opportunity isn’t that. It’s the perfect opportunity because of that foundation that you’ve built that can support businesses that are, you know, outside of the typical norm for, you know, the core businesses that you started with.

Yeah. You know, we’ve also grown into a turnkey general contractor for our automation services too. So we’re not, you know, we’re also doing construction work with our automation.

So if you’re by a, you know, an automated paint system and you need a new chiller and a new air handler and dust control and all those types of things, we’re now doing that as a turnkey, where a lot of automation companies won’t do that. We see that as a skill set and a value to our customers to be able to do full turnkey projects. And it actually helps us.

It helps us control the flow of the project. And our automation typically works better when we’re the general contractor. Because when we get on site, what we need is there.

We’re not waiting around, you know, electrician didn’t, you know, forgot to run wire here, run wire there, you know, it’s all on our back. And it turns out to be much smoother for us, we find. Manufacturers, what is your biggest headache? Is it measuring improving profitability, gaining efficiencies with AI and automation, maybe tightening up your cybersecurity, maybe getting your business ready to sell? At CLA, their goal is to know you and help you with challenges like these and more.

Every day, CLA helps manufacturers tap into millions in revenue and cost savings, like one manufacturer that boosted capacity and revenues by 15 to 20%. Visit claconnect.com to hear real success stories and learn how you can grow your top and bottom line. You know, one of the things that stood out the first time we talked is you were just kind of like lamenting the stresses of being such a busy entrepreneur.

And I remember at one point, you were like, man, I’ve been broke. I’ve been rich. I’ve been double broke.

I’ve been way richer than I was the first time. Like that roller coaster that is being an entrepreneur. Let’s speak to that for a minute, just kind of the personal side and how you manage that as a leader and how you keep kind of stay level headed when you’re on a roller coaster in the middle of a tornado.

[43:28] You know, any entrepreneur, you know, until you have to make your first payroll and you start, that payroll starts to grow every two weeks. And then you look back after 10 years and you’re like, oh my God, like our payroll for the month is now a payroll for the day or for four hours. Right.

And, and then it’s fun. And there’s some accomplishment in that, but the roller coaster of what we do in these industrial sectors drive that roller coaster. And you’re stuck in that roller coaster.

I haven’t found one person in our industry, automation or CNC that hasn’t, that doesn’t go through that roller coaster. Now, I think what happens to a lot of entrepreneurs is at some point you’ll get to the bottom of that dip and the entrepreneurs that hit the accelerator to get to the next dip are the ones that grow their businesses. The ones that are like, okay, I’m making X, Y, Z, and now I’m flat.

[44:24] I don’t want to do that anymore. It’s no gas, I’ll break. You know, we’re all gas, they’ll break.

And we throttle with the brake just a little bit. And you know, there’s some experience to that, but if you diversify your business well enough, you know, you can handle those roller coasters a little bit better. And none of this is easy and nor will it ever be easy.

But as an entrepreneur, you have to decide where do you want to be in five years, 10 years, 15 years. If you don’t think that that I’m not going to be on that roller coaster and I’m going to have this, you know, a $50 million business, well, I’m not smart enough to know how to get there. I wish I was better.

[45:03] Like the influencers on YouTube and Instagram that are like, just read all these books. You’ll be good. Yeah.

Yeah. I wish. I don’t think it’s a magic wand.

I think you have to, you meander down this path of, okay, what decision do I need to make this hour to make sure 24 hours from now we’re still alive? And that’s how, you know, you have to think. You know, I was listening to a, uh, a podcast with, uh, the CEO of NVIDIA and he still wakes up every morning worrying about going broke. And, you know, and I think you have to have that, that mindset and it has to be throttle, all throttle, no break, or you just, you won’t be able to grow.

And, and the speed of business today is so fast that you need, you need to think, you know, into the future. So how do you balance that kind of fear of going broke with the, uh, you know, positive optimism to, you know, you gotta have some wins in there. You can’t just be like paranoid all the time of what could go wrong.

You kind of need that relentless optimism that a lot of entrepreneurs share. I mean, do you find it difficult to balance the stress and the fear and the worry with the, oh my gosh, this is amazing. I can’t believe we’ve achieved this.

[46:20] Yeah, I think it’s difficult, right? Because I think for every achievement, you always look at the mountain ahead of you. You never looked at the mountain behind you that you went over and you came down. Now the real question is, is the next mountain higher? Is it shorter? You know, is it steeper as a hockey stick? And looking back and determining was this successful? You know, I think you gotta look at your employees.

Are you doing the right things for your employees? Or are they, are they prospering? Are they growing as a professional? You know, can they afford to buy a home and have kids and get married? You know, we’re, that’s what we’re growing inside of PSA is that growth of opportunity to expand your life. And to me, that’s actually more rewarding than, you know, being on a podcast, not that being on this podcast, guys, isn’t rewarding, but you know, you look at, you look at your employees and if they can be successful in their personal lives, well then you did something right. And you know, they should almost be more successful than you are as the entrepreneur because they’re counting on you to make the decisions to be able to pay their mortgage or their kid’s college.

[47:26] That’s your goal as an entrepreneur. That is beautiful. What a great way to kind of like wrap this up too, is to ultimately it all comes down to people.

We talk about technology all the time, Dave. It’s all about robots and automation and AI and whatever. And then every single episode comes back to people and the best leaders make it about people.

[47:47] Yeah, I think that you’re right. Like the automation can make the people’s lives better. And that’s like our goal of IBM Watson rollout is to make our staff’s lives better because their life is better at work.

Everything in their life is better. That is the underlying goal. Yeah.

For me, I would say like, you know, I’m part of the audience too. I’m listening to every episode that I’m on, and I’m always thinking, hey, what can I take away from this? And your story, Mike, to me is about just the opportunity that you call it like it being an industrial. You know, I always kind of want to know what you mean by that word.

But for me, it’s like you can do everything. You’ve got an automation company, a fab company, a machining company. And that’s what allows you to go pursue this awesome opportunity with the coal mining or with the bottling company or whatever.

And that’s kind of the takeaway. And that’s what inspires me is our business is similar. You know, we’ve got one one company that’s more sheet metal fabrication, laser cut, bend, powder coat that that side.

And then we’ve got the precision machining company. And sometimes serving the machine tool industry is tough, as you can imagine, like it’s not the same as like our data center power generation business, where it’s just you can’t possibly grow as fast as the industry. And so it’s like, man, it’s so it’s such a grind to fight for every single order.

And like, shouldn’t we just go after some industry where things are just skyrocketing and you can’t help but win? But I always have to remind myself that, hey, because we can do all these things, we found ourselves in that other opportunity, right? And that that foundation of being an industrial or being really vertically integrated to where pretty much anything that comes our way that’s made out of metal, or requires some engineering or whatever is something we can do. Now, I always got to remember, well, just because you can do it doesn’t mean you should do it. I can get a little shiny object syndrome from time to time.

And I can run into ideas where it’s like, gosh, that sounds so appealing. But is that just like a siren luring us into the rocks? Or should we actually go after this? And I think that that kind of discernment and maturity is you just have to kind of screw a bunch of stuff up sometimes and figure out how to avoid those landmines. Yeah, you’re never going to be 100% correct.

It’s just it’s just impossible. You know, you’re going to look at things and be like, this opportunity looks like a like a home run. And it turns out to be a dud.

And then you’re going to look at one and be like, oh, this is a good like single, you know, good bun. And it turns out to be the home run. You never know unless you try.

Yeah, you know, one of the things that I’m taking away here, Mike, is you never treated our discussion on AI, automation, business strategy, etc. as different conversations. You know, like there’s an automation budget over here and someone over there is poking around with AI and then the strategy kind of lives upstairs.

And I think perhaps maybe that’s a mistake people make sometimes, you know, treating technology like a series of purchases instead of a position on where the business is going, which I think is part of the point you were trying to make, you know, rather than, you know, seeing technology as what it is, which is the the leverage you can apply to the plan that helps you, you know, get to where you want to go, ultimately. Yeah, I think that’s well said, Dave. We’re still a small business, so we don’t have a C-suite that sits on the 50th floor of the building.

[51:15] So it’s really that it’s the team, it’s everybody in the company building portions of what we do, whether it’s the machine job or the fab job or the AI. It’s all inside of a, you know, a five or six or seven person group putting that together. And they’re the drivers of it.

I tee it up and I let them tell me where to go. It’s not me. Like I sit in on the meetings, but I don’t really drive that direction.

They drive the direction. I’m frankly not smart enough. They know how we run our business.

I don’t really know. Yeah, that’s awesome. Well, big thanks to you, Mike, for joining us today.

And, you know, to our audience, a question maybe for you to sit on this week. If someone asked you about your five-year plan for the business, could you answer that clearly? And does your technology purchases or the technology you’re looking at buying, does that serve that plan? And if not, maybe that’s something to put on the to-do list, you know, really, really soon. Otherwise, thank you so much for spending some time with us and listening and watching this episode.

Share this with whoever in your shop needs to hear it. Subscribe, leave us a review, give us some feedback. And of course, everything can be found at makingchips.com. On behalf of Nick, Eric, myself, this has been Lights Out, and we are turning the lights off on this episode.

Thank you so much.