For more than 40 years, Harry E. Figgie Jr. taught us to be entrepreneurial by following the axioms of understanding opportunities, taking reasonable risks and profitably growing your business. As a refresher and reminder, we often refer back to his teachings as explained in his book, “How to Build a Billion Dollar Company from Scratch.”
During the closing days of 1963, Figgie left his job at Booz Allen Hamilton and assembled the financing to purchase a struggling $23 million sprinkler company. During the next 30 years, he grew the company into a consistently profitable, $1.3 billion diversified corporation through a strategic combination of internal and external growth and a consistent focus on profit improvement. His book is a step-by-step guide on how to replicate his success.
Building upon his foundation, we have summarized some of his most salient points about building a large diversified company from scratch.
- Guidelines for getting started
■ Companies doing between $50 million and $500 million in sales represent the backbone of the United States economy.
■ Convince banks or venture capitalists that their investments are secure and can yield a considerable return on investment.
■ Surround yourself with dynamic people who thrive on crises, like to grab hold of things and do something, have a primal impatience to get their hands around a problem and shake it around until a solution presents itself.
■ Use reliable, common sense measures to increase profits, like ratio analysis and work sampling, ABC inventory control, product redesign and a focus on those areas where your company is spending most of its money.
- Build through acquisitions
The Nucleus Theory of Growth — This theory requires you to identify an industry with growth potential. Once you identify that industry, you should take the following steps:
■ Acquire a company within that industry to serve as a nucleus or flagship operation.
■ Implement a three-part program within each nucleus of cost reduction, sales and market expansion and research and development.
■ Acquire additional companies within the selected nucleus industry and implement the same three-step program for each new operation.
The initial acquisition that creates a new nucleus should be in an industry with the following parameters.
■ The industry should have quantifiable growth prospects.
■ It should not be dominated by international competition for the foreseeable future.
■ It should not dominated by one or two giants.
■ Select an environment in which a $75 million to $100 million company represents a position of considerable importance.
■ Choose an industry in which you have some experience.
There are many more great suggestions, ideas and lessons that Harry Figgie shared both to his staff and in his book. The premises above will help you get started.
Matthew P. Figgie is chairman of Clark-Reliance is a global, multi-divisional manufacturing company with sales in more than 80 companies, serving the power generation petroleum, refining and chemical processing industries. Matthew is also chairman of Figgie Capital and the Figgie Foundation.
Rick Solon is president and CEO, Clark-Reliance. Rick has more than 35 years of experience in manufacturing and operating companies.