US Entrepreneurship in Poland: Michael Klepacz of Natural Materials Unlimited

US Entrepreneurship in Poland: Michael Klepacz of Natural Materials Unlimited

Michael Klepacz

What are some challenges for an American to establish a manufacturing facility in Poland, a country more risk-averse than most? Michael Klepacz uses the advantages of a low-cost country to pay 20% more than the minimum wage but illustrates the sometimes lack of personal responsibility, the “good enough” mentality, “not connecting the dots” and the “ghosts of Communism.” Nevertheless, he would rather be nowhere else and in a country with a lot of “low-hanging fruit.” Michael also illustrates how to have a factory in a country when you (mostly) don’t speak its language and how he strives to maintain high quality standards. His company makes undyed textiles and products made from hemp and linen (including paper and vegan-friendly guitar straps), and markets mainly through trade shows, individual distributors, and sales reps to send his products westward into Europe and on to North America.

Highlights:

Treeless paper

Choosing Poland as a country of operation

The Ghosts of Communism in Poland

Training Methods in Poland

Sales and Marketing in Poland

Cultivating Relationships in Europe

Products Michael sells

The Effect of the Ukraine War on European Business

Michael Klepacz bio:

Michael Klepacz is a former aircraft mechanic turned eco-entrepreneur. Born and raised in Ohio, he moved to Poland in 2012 to use the GI Bill for business school, getting a BA and MA in entrepreneurial management. He started Poland-based Natural Materials Unlimited in 2015 and makes finished products from local textiles and treeless paper.

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Full Transcript

Hello everyone. Today's guest is coming to us from Poland, but I thought instead we would do a blooper from China, which makes no sense at all except perhaps because of Poland’s exports to China.

So, a sign in China said, of course in Chinese which was very clear, but then it said underneath in English, No littering, violators will be fine. So, that's an example of what happens, of course, when you don't use professional linguists to do your translations properly. 

Today's guest is Michael Klepacz. Michael is a former aircraft mechanic turned eco-entrepreneur, born and raised in Ohio, he moved to Poland in 2012 and used the GI Bill for Business School, getting a BA and MA in entrepreneurial management. In 2015 he started Poland-based Natural Materials Unlimited which makes finished products from local textiles and treeless paper. 

Good morning. Hello, Michael. Glad you could join us today.

Thanks a lot for having me. It's good to be here.

So perhaps you could explain to everyone first what treeless paper is. You explained that to me before we started, but most people assume that paper comes from trees, and obviously, not all of them do.

That's true. So right now, about 90% of all of the paper in the world is made from trees, and the rest is made from materials like linen and hemp, rice, wheat, and other cellulose material. So, you know, textiles that are natural, like linen and paper are made from cellulose and so the paper is just very short cellulose and linen is very long cellulose. And so that's the general gist of it. The Germans figured out how to turn trees into paper a couple of 100 years ago.

It's fascinating. Thank you. What motivated a nice American guy to establish a manufacturing operation in Poland as opposed to in the US or any other country?

Well, I always try to be a local patriot. And so, I started dating a girl and she made it clear that she does not ever want to leave Poland. And I told her, OK, no problem. But as soon as I'm done with university, we're going to move at least out of the city, and get back to the country Life that I prefer, which never ended up happening. It didn't happen. 

But yeah, so for me it was a necessity. I've always had Polish people ask me why I don't do business in Ukraine, and I've had Ukrainians ask me why I don't do business in China. And the short answer is I try to do business locally no matter what.

So, you studied in Poland, and you met your now wife, right? And then you settled there. Yeah, very good. 

In what ways was this process easier or more difficult? It's unusual for an American just to establish a venture abroad without first being in the United States.

So it was definitely not easy, right? Poland in particular seems like they don't actually want any foreigners here. Even if you have a Polish last name, it doesn't give you a special pass.

You do, right?

What I did was I started this company as kind of like a ghost investor with a local Polish person who I had hoped could help grow the company with me. And yeah, It was an interesting experience for sure. So, I kind of needed somebody who could be my Liaison between myself, the government, myself, the Tax Office, myself, the legal system, myself, you know, et cetera. So, I was good at business, and he was good at being Polish.

Yes, in many foreign ventures, it's always beneficial to have a national partner; I want to say to manipulate the system... That's not correct… to navigate, navigate the system and understand how it works.

There were a lot of strategies involved for sure and we both learned a lot, but yeah, in Poland it's absolutely necessary to have a native helping you out.

And I assume your Polish is at a business-level now.

Absolutely not, no, it's interesting, you know, being in Warsaw, I don't want to say that you become a local celebrity or whatever, but it's just it's rare to run into an American or something. And so, as I could go to a house party, and all of a sudden everybody's just started speaking in English. Like they get to practice. English for free. Everybody under the age of 45 is pretty much fluent in English. The only time when it's really starting to get bad. Now that I'm getting to like the experience level. I might be sitting on a board of a company or something like that. I lose out on the opportunity because the board doesn't want to change their entire language around one person, you know. 

And so, I've been learning Polish, on and off, aggressively, and casually for 10 or so years, but it's just not at the level that I would feel comfortable with … assuming that I understood enough to sign my name to something. Do you know what I mean, right?

But when you speak with your employees, do you speak in Polish?

When I speak with my employees, I either talk to them in English or someone talks to them on my behalf. So, like with people who are in production, it's not generally necessary that I talk to them. But conversationally, if I need to convey something to them about production or if something needs to change, I could get away with it. But it's not something I'd signed my name to. There's always some hand gestures and simple language, right? They talk to me like I'm three years old.

Yes, naturally that's great. 

I visited Poland in 2019 and a long-term American businessman there told me that the Poles have trouble connecting the dots, as he said … realizing that this step would lead to the next step. And basically, what he meant is that they don't think through the entire process. Now I know you're in Poland and can't necessarily speak ill of your hosts, but what can you say about that in terms of the Polish way of doing business?

You know, I'm not sure. I'm not sure what to… It's not that I want to be polite or impolite, right? It's not. I haven't actually identified it yet, right? Like sometimes I say. Oh, it's the ghosts of Communism. Sometimes I could say oh it's the individual. Well, but overall, you know, I was talking to an entrepreneur or a foreign friend the other day and his observation I thought made a lot of sense. That is most people are very transactional. Do you know what I mean?

And so, it's like the transaction is that they do A. They might take 4 hours to do A or 10 hours. If you let them. You know, I don't want to come across that I'm here. I'm doing business here, so most people aren't exactly lazy. They're all  hard-working people, but I have noticed through, you know, partnerships that I've done that it's like OK guys, we've done this type of job before. You know it's a through D. Why do I have to tell you to start B? You know, and that's true. It seems to me. 

But I mean, I'm a bit of an enigma. You know, I'm a lean process management trained by a Toyota Corporation veteran, like a hard-working enigma. And so maybe I just have high standards, but it sounds like your friend had a similar experience.

Yes, very interesting. Tell me about just doing business in Poland and about the management methods. The marketing method. Many guests have said in management there is often the initiative approach in the top-down approach. The top-down approach is where the boss says what's to be done and the employees do it and the initiative approach is more common in the United States, where ideas bubble up from the bottom and people take the initiative and can implement it. Given a general goal, what is it like in Poland?

I think it can really be kind of both. Maybe it depends on the industry. I know within our company in particular I kind of was thinking that maybe it was like we actually created a bad culture in Poland. They have this phrase called Januszek that if it's like anguish, so Yan is like a guy. And Januszek is a diminutive form of his name.

And so, for it to be a Januszek business, we would just call it like a mom and pop, you know. Maybe things aren't done properly. Things are done on sticky notes and notepads instead of Excel or whatever, like just a very casual Good Enough attitude.

And so, the best anecdote I can give for someone’s critical thinking or not, is after I took over the company. In 2021, I had a lot of changes to make mentally, and so it used to be like they had low-quality tools, and me being a mechanic, I always say that I cannot expect you to outperform your worst tool.

And so, the best example was I walked up one day and there was a guy mopping… super intelligent, going to school for computer programming, but never the type to complain. Very nice guy and I noticed that the mop was broken. And so, and every time... It's like one of those Swiffer-style mops, and so it's meant to like to lock flat and stay that way. But every time he picked it up, it would fall, and he'd have to make it flat again, just to keep mopping. 

And so, he was basically just pushing around dirt. And I said to him, Hey, Why wouldn't you tell anyone the mop is broken? After two years of me running this company the way that I like it, you know how I feel about tools. And like if you're earning 25 zlote in an hour and it takes you twice as long now that you have a broken mop. You know, like just allow me to go get you a new mop. And so, then I spent an hour going to their local version of Lowe's or Home Depot. And there are just crappy mops there, you know? 

So, I ended up going on Amazon and buying one of these massive commercial mops with the huge heavy mop bucket that you see in American hospitals. Right. Because again, you can't expect people to outperform their tools. But they just won't say anything. So, it's like there I find that there's an issue of personal responsibility. Maybe it’s kind of how I've started to nail it down. 

They want their boss to tell them what to do. They'll do what they're told, even if they think it might not be the best action. And that's what I would tell people like, hey, you know, I'm a process manager. I've developed this process to the best of my ability. But once the rubber hits the road, you're going to be coming up with your own efficiencies, your own ideas, and you need to tell them to us so that we can let the best ideas get adopted throughout the entire company, especially for production, because our production people earn per piece; they don't get paid by the hour, they get paid by the unit that they produce, which passes quality control. 

And so, you know if I have one person making 200 widgets an hour and the other person is making 450, nd the person making 450 has a rejection rate that's like 2%. OK, so they got the secret sauce. What did they figure out? And so yeah, it's this initiative thing. You know, it's a tough nut too.

Was this man educated under Communism?

No, he was 20 or 21. Again, it's like this ghost of Communism thing. I'm not sure. There are some people in my company who work in production who are a bit older than me and the only issue that I have is that they don't clean their machinery often enough. Like I told them, keep your machines clean. You know, preventative maintenance. I'm all about being a former mechanic. 

Right.

Because as the machines break, you see trends. You're like, OK, this person always breaks a different machine, and this part always fails. What could they be doing wrong? Oh, maybe they're not doing the lubrication cycle right. Maybe you know something. Yeah, not always Communism, but maybe parents who are Communists putting ideas upon their children.

Well, that example you gave with the mop guy, that to me is connecting the dots … or not connecting the dots. You know, if the mop is not working but you don't say anything, you just keep doing it instead of seeing what you can do to fix it, that’s not taking the initiative. Very interesting. 

What about training methods or management methods? Do you have to adjust your process in other ways, or do you think in other ways when you're dealing with your employees?

I have a guy who has a Master’s in logistics. He's in charge of the warehouse. He's in charge of the production for the most part. I tried to push him, I think outside of his comfort level when we ended up hiring more people because, for me, it's all about systems, and you need… especially with production you need to have standards and systems. They need to be written down. You know, as if we were all of a sudden to die and someone found our book. They could restart the place, and that's how it should be. 

It can be a little bit tough. We got to the point with training that we would take the best. If we're performing the best and then we would pay them, like 120% more per day than they would have normally been paying, getting paid had they been on the production line to train people. So that helped out.

Well, what about marketing and sales? How do you find your clients? Do you have personal introductions from them or to them, or can you do the equivalent of cold calling? How do you find your sales in this way?

Generally speaking, the tough part is always sales. We don't do a lot of selling in Poland. We do mostly export in our business. So, we do a lot of trade shows, things like that. I've found generally that if you can find a Polish person who's a good closer, keep them and pay them very well. 

I think that Polish people are good at lead generation, but not so good at closing. And I can say that pointing at myself too as well, for I'll call myself Polish in this case, I'm not a good closer like I can close the deal through my passion and evangelical thinking. But I'm not quite good at sales myself; sales and marketing are something that we've always struggled with. We're a creative company and we're good at designing machines and designing products. But we've always gotten lucky somehow. I think with sales just by showing up and being present at the right events and things like that.

Do you sell mainly in Poland? I think you said that you export a lot of your products.

That's mainly abroad. I'd say less than 1% of our businesses are from Poland.

And to what countries do you export?

North America as a whole and outside of Poland westward: Spain, Ireland, Germany, France occasionally, sometimes Belgium, Canada, North America, and occasionally Australia.

So, in that case, doing business in each country can be different. 

For sure.

How do you find your clients and if you don't necessarily speak their language, what do you do?

You know, trade shows help. LinkedIn helps. I've tried to hire a couple of different marketing companies over the last couple of years. LinkedIn is really good because even if it's, let's just say, German, you can go into LinkedIn sales and search for all of the German profiles in a niche that actually use English in their profile or something. 

And so, I've also tried to hire people specifically in each language set. Once Upon a Time a few months ago, I was doing preliminary interviews with a Danish Polish kid. You know, he was 23 years old. His mom was Danish. His dad was Polish. He grew up over there, but he was here for university or something and he was looking to bring Polish products into Denmark. Those are always fun examples. 

So, but also, you know, that being said, for anyone who's interested, I try to do as much work with local entrepreneurs as possible. So, like right now I have a guy who's in Berlin. It's his own company and he represents us and our capabilities. And we sell through him.

So he's a distributor.

I wouldn't call him a distributor, per se. He's an independent sales contractor.

And then he has contacts in Europe. Yeah, interesting. 

  1. In many cases, international business requires personal relationships. So, you often dine with people to develop a sense of trust and so forth. From there you can do business, whereas in the US, it's very much the cold-calling approach. Have you done a lot of this cultivating of relationships since you've been in Poland?

So Warsaw is a really interesting place to be for sure. I mean, firstly, it's great to be in the capital. So, being here around the capital, we have very good Expo centers. I would say within a 45-minute drive of downtown Warsaw, there's lots of local entrepreneurial events and things like that. There are different Chambers of Commerce for different countries.

So, at one time when we first started doing business because we do things with eco-friendly materials, the guy whom I had started to work with was my business partner. I said, listen, we know that there's a lot of hemp being grown in Romania. Let's just go to the embassy. One would imagine… that's their job to make sure that their country is well represented in other countries and we can do business between the embassies.

So, we went to the Romanian Embassy, and at the time, they were one of the largest producers of hemp for non-medical purposes. So, for industrial usage and the lady at the embassy was like, is this even legal? It's like you're one of the top exporters of hemp textiles and fibers. 

So, it was quite funny to see things. I went to a meeting the other day with some people from McDonald's, and I handed them my business card and told them that it was made from hemp paper. And they smelled the business card… like it would smell like weed or something. It's like, nope, it smells like paper. It's all cellulose. Doesn't smell like weed.

It's funny. But in your sales process, do you do a lot of wining and dining for potential distributors or potential clients?

I like to take people to lunch. It's a really great place. I'll plug them into N31 in downtown Warsaw by the Novotel Hotel. They're amazing. They give you great experience for what you can get per person for like 65 zlote. It's you, my friend says this is like you. They treat you like a Russian oligarch.

Complete with the caviar.

Almost. Almost.

Yes, it's funny. Very good. So, when you do business in say, Ireland or Spain, do you actually go there, or do you have salespeople who travel for you?

So, like any of those people for the most part, we met through trade shows and then it ends up being like, you know, they come here, we go there, etcetera. I mean, the interesting thing is having been through COVID times though, right? 

I have never had so little opportunity to actually do face face-to-face and all of a sudden people are kind of normalized. I don't want to say this American style of doing business, but this has become the new plane ticket. Do you know what I mean? Like, people now are just kind of like, why bother? Why bother going through all the effort when we could just have a face-to-face because they have boardroom cameras that will switch back and forth between whoever was talking. And so, it’s interesting, the changes have happened since 2019.

What about other elements of your process of pricing, design, and colors – if that matters– but do you have to change your product for different markets?

So, a lot of what we do is white labeling, so we do a lot of whatever the clients prefer. I mean, it's interesting, right? Because we do a lot of things that are natural and that includes products that are not dyed, you know, so undyed textiles are a huge part of our business. You know, you get to see who actually cares about colors and which colors, who has opinions about which materials are always interesting. But, yeah, It's tough to say it's hard. I can't put a statement on it, I guess.

Give us some examples of the kinds of products that you sell.

Lately, we've been finally once again working on a yoga mat for a Spanish company and for an Irish company. So, it's been a bit of a Holy Grail for me besides the hemp paper because pre-Ukraine war, pre-COVID we were producing them in Ukraine, the issue was that we wanted to use the European Union. And then it was getting brought over to Ukraine tax. They’re sewn there because it uses a special sewing machine that is very available in Ukraine and then sent back and is double taxed and so it kind of hurts the business model a bit. 

Now the other is because we don't do everything, right? Within the textile industry there are so many different art forms that we can't have every machine. We can't have every person trained and stuff. And so, in Polish, they call it Pikowanie. But I call it… It's like quilting. A machine takes 2 meters wide fabric on the top and bottom plus insulation and puts it through this massive multi multi-heading machine. 

So instead of having just, you know, you could do a dual-access sewing machine and do say 1 duvet at once. Or you can have this quilting machine that has a multitude of sewing heads and does it all at the same time, and so we've had a hell of a time trying to find a partner willing to do the materials that we use because unlike Egyptian cotton and some kind of synthetic insulation, the materials that we work with are a bit tougher and harder for the needles to pierce, harder on the machines, etcetera, and so hopefully we've solved this problem and we can finally start selling yoga mats that are eco-friendly out West. But I don't want to say yes yet.

When you say textiles, I think of textiles as clothing, or fabric that can be made into clothing, and you're talking about yoga mats and then textiles. What other kinds of products do you make?

We work with a knitting company. So, he can do flat knitting or 3D knitting, which is just the coolest thing I've ever seen. It's basically a flat knitting machine that is like your grandmother's hands that go back and forth like a typewriter. Kind of, but then the knitting machine is two of those put together, and then the string kind of goes between the two beds and all of a sudden now, it could take an hour, but it spits out like a hoodie, you know, or a sweater without any extra sewing and very minimal waste.

And so, we also work with one of the best leather companies in the country because leather working itself is the artwork. And so, like we do vegan-friendly guitar straps. And so, we don't actually do any of the leatherworking ourselves or the non-leather because it's vegan; we send it over to them. Because you have the example near me, but you have the end tab, which is the portion that actually locks onto the guitar. It has to be done flawlessly, like every stitch has to be beautiful. And it's just, it's a tough thing to do if you don't have the right machines to do it. 

And so, we just get all the materials together like from hemp or linen. We put everything together, we get it all embroidered and prepared and then we send it over to the leather company who puts the ends on it and then they send it back to us. We package it.

And we’ve made hemp notebooks and tree-free business cards. We've done dog accessories, and yoga straps which are, if you're like me and you're not good at doing yoga and you need some help to do some extra stretching, you can put these straps around your ankle or wrists and use different techniques to deepen the stretch. Lots of different things like that, so you know textiles, in general, can come woven like your shirt or knitted like my T-shirt. The T-shirt is actually knitted. It's called a jersey knit. That's the name of the knit. You can do flat weaving as well. This is the only thing I have within arm’s reach. This is called webbing. So that's like the belt material that we use for actual belts, handles for bags, dog accessories, guitar straps, all that stuff is from the webbing. And actually, I posted a funny article the other day about 100 different ways to use webbing and one way that I forgot was those old-school oil lamps used to use a flat wick and that was one thing I forgot about and so, yeah, we try to use linen and stuff, or hemp because it's more eco-friendly than cotton.

That's fascinating. What about the Ukraine war? How has that affected your operations?

I mean it hasn't affected us so much directly, but it's affected the speed at which we can evolve. So a large portion of hemp textiles come from Ukraine, and it's still a bit available, but it's kind of hard to navigate, right? 

And so, I know plenty of entrepreneurs there, like Oksana Devoe from Divo home. She's in the Netherlands now. You know, she was in Kyiv. Her business is still going, you know, obviously, her employees are scattered all over the place. And her ability to produce items is probably diminished. But you know, I think they're over there making the most of it. 

But yeah, I mean Russia and Ukraine, Belarus, all big producers of hemp and linen. Romania, big producers of hemp and linen. I think what we're seeing right now though is Poland has a huge opportunity to become a major player in supplying hemp to Europe. It's not quite well suited to produce linen, which is from flax, as Belgium and France, because they have different climates. But we're going to see each other over the next ten to 15 years especially if a big movement goes from flax to hemp because hemp is more drought tolerant.

Very interesting. Thank you. Is there anything else you'd like to add before we close?

I would say regardless of all the challenges in Poland, there's a lot of low-hanging fruit here. For any American entrepreneurs who are over there wondering where's a good place to start a small business, I think there's a lot of low-hanging fruit. You know, there's a lot of … Europeans in general are pretty averse to risk. 

And I think that for whatever reason, Polish people seem to be more averse to risk, whereas in American culture, we say things like fail forward and first attempt at learning, and things like that. And we have a different relationship with failure. 

And so, it's not like that here and because of that, and maybe because of difficulties of regulations and navigating legal systems and stuff here, there's less entrepreneurship than there should be. 

Of course, I would love to see as much entrepreneurship as possible but yeah, the basics for me are that I'm not leaving and there are lots of opportunities. And I know exactly what business I would be doing if I were not doing this.

And would you ever consider doing it in the United States or just expanding?

Well, the business that I would do here if I weren't doing the business I'm doing now is already in the United States, which is why I would do it here.

Makes sense.

But the business that I'm doing right now, I think I wouldn't really be able to get away with it. Poland. It works out really well right now because Poland is not on the euro and the minimum wage here is so low and so my company, in particular, advertises itself as a company that pays more than minimum wage. And even though we're paying say 20% more than minimum wage or more, that still is much lower than the minimum wage in Germany, much lower than the minimum wage in France or Ireland, or the US. 

And so, you can give people here, you know, $6 to $9 an hour and, you know, $9 an hour is a great wage for someone who doesn't have a college degree.

Right. Very true. And that's a wonderful opportunity that Poland has over other countries.

Yeah, yeah, that's another good reason to stay. Hard working people. The cost of living here is just so much less. Do you know what I mean?

And what about the education level? Are people easily trained?

I think so. Some of the best people who ever worked for me... one in particular, in particular, finished high school. Do you know what I mean? I think we do a lot of physical work and stuff like that. A lot of like blue-collar style stuff with different industrial techniques or even sewing. And I think that you know, a lot of that is, let's just call it vocational work. No different than being an aircraft mechanic, which I consider a vocation. You know, it's not like being a chemist or a scientist or a doctor or something where you need university. I'm not actually a big believer in higher education so much in that way. I think the best way to learn to be an entrepreneur is to find a mentor or something.

And then to do it.

Just to do it.

Thank you. 

Before we close, I'd like to thank Michael Klepacz very much for joining us today.

Thanks very much.

And I hope that all of you will join us next week for another episode of Global Gurus and their stories of international business. Thank you.

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