You can be on Entrepreneur’s cover!

Build a Billion From the Ground Up Learn how you can become a billionaire from the man who did it from scratch.

By Elizabeth Wilson

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Harry E. Figgie Jr. is famous for taking over the struggling $23 million sprinkler company Automatic Sprinkler Corp. of American in 1963 and turning it into the $1.3 billion Figgie International. One of the ways the Figgie empire grew was through numerous acquisitions of small companies. He is the author of New York Times bestseller Bankruptcy 1995 in which he foretells America's downfall due to high national debt and too much government spending.

Entrepreneur: If you were an entrepreneur now, in this economy, where would you start out? What industry would you want to dive into?

Harry E. Figgie Jr.: I would give the same advice that publishers give writers: Focus on what you know. In my case, almost all my experience is in manufacturing, so that's where I would concentrate my efforts. In fact, that's where my son and I are focusing as we begin to set our sights on building our family company into a larger operation.

I know that even before the current recession began, the widely held perception was that U.S. manufacturing was dead, that U.S. companies could no longer compete in a global "flat" world. But I strongly disagree with that premise.

While it is true that U.S. manufacturing will never again dominate the U.S. economy as it once did, it still accounts for about $50 billion in exports every month. Standing by itself, it would be the eighth largest economy in the world. More goods are made in the United States today than at any time in history, and 2006 was a record year in the U.S. for output, revenue, profit and return on investment.

There are thousands of small and medium-size manufacturing businesses in the United States that are consistently profitable and compete just fine with international competition. The key is the value proposition--setting the business apart by using technical expertise to design a fundamentally better product. Long life, coupled with an ability to manufacture an item the first time with the correct design and performance, makes all the difference in the world to most clients. That's where small and mid-size companies in the U.S. have an advantage, based on the technical skills of our people, and that's the kind of manufacturing company I'd look for as a starting point for growing a larger business.

Where would you suggest entrepreneurs find startup capital for their business venture today?

That's a tough one because the credit markets have largely dried up in recent months. Hopefully the current efforts to help the U.S. banking system will be effective.

Until recently, I would have said that it has become much easier to raise funds than it was when I built a billion dollar company from scratch, mainly due to the massive growth of pension funds that contributed to the proliferation of venture capital funds. Until the economy improves, I would look for financing the same place I did--from people who you know, from people who have confidence that you will be successful. That might include friends, but also bankers, venture capitalists and colleagues who believe in you and agree that there are significant opportunities in this economy.

In your book, you list "A Few Early Guidelines For Getting Started" on page 15. In it, you say that companies doing between $50 million and $500 million represent the backbone of the U.S. economy and that's where you'd begin if you wanted to build a large, diversified public company from scratch. Is that still what you'd say in this economy?
Yes, although I would look at companies with sales as low as $10 million, as long as they're either profitable already, or as long as you have confidence that you can make them profitable quickly with some traditional, straightforward profit improvement techniques.

What are your top five tips for entrepreneurs today hoping to build a billion-dollar company from scratch?

I'll try to keep it to five:

  1. I suggest an initial acquisition in an industry in which you have some experience, in which a modest-size company represents a position of considerable importance. Be on the lookout for concerns which aren't so blue chip that you can't afford them, but not so sick that they won't be susceptible to profit improvement.
  2. Value companies the same way you would a new piece of equipment, based on how long it will take to pay back the purchase price from earnings.
  3. Surround yourself with people who thrive on crises, who like to grab hold of things and do something, who have a primal impatience to get their hands around a problem and shake it around until a solution presents itself.
  4. Don't get too fancy in your techniques at improving profits after you purchase a company. Use tried and true, commonsense measures, 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.
  5. Grow the company with a simultaneous strategy of acquisitions and internal growth. As you acquire companies, divide them into categories that make sense to you and complement each other. I called our strategy the "nucleus theory," which is essentially the selection, acquisition and internal development of companies within selected major industries and with complementary product lines.

Harry E. Figgie Jr., a profit improvement expert since the 1950s, is the author of the bestseller Bankruptcy 1995 and the recently-published How to Build a Billion Dollar Company from Scratch. He is currently co-authoring a new book called Looking for an Edge: Demystifying Today's Management Strategies and Techniques, intended to debunk the myth that effective profit improvement needs to be anything more than unadorned common sense. For further information see harryfiggie.com. Mr. Figgie's co-writer is Adam Snyder.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

From Tom Brady to Kevin O'Leary – See Who Lost Big in the Wake of the FTX Crypto Collapse

The crash exposed an $8 billion hole in FTX's accounts, leaving investors and customers scrambling to recoup their funds.

Business News

This Highly-Debated Piece of Cinematic History Just Sold For Over $700,000 at Auction

The wood panel from "Titanic" is often mistaken as a door. Either way, he couldn't have fit. (Sorry.)

Business News

'Wildly Inappropriate': Woman Says She Was Denied a Job Because She Didn't Wear Makeup During the Interview

Melissa Weaver was applying for a VP of HR job at a tech company via video.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.