The Cost of Building a Business

I recently posted a picture of myself boarding a joint venture partner’s plane. They used to pick me up and we would visit our or other facilities. In my overall career, it wasn’t that frequent, but it sure beat the experience of commercial flying.

My daughter responded with the following comment in which she said, “Glad you got to do that from time to time because for every one of those trips you had hundreds in coach, flight cancellations, lost luggage, spilled drinks, no meals, screaming children, got stuck in nondescript airports, luggage without wheels, no cell phones and a host of other road-warrior mishaps and circumstances. You have more than earned that one!"

Her points are well taken, but most of us can relate to the joys of business travel like the shrinking leg room, frazzled flight crews, nasty weather and flight cancellations. You can add to that the loneliness, boredom, jet lag and missed family events and milestones as well as other travails. I tried to overcome that absence by taking many a red-eye home.

In building a business, travel is just part of the bigger picture which you do for yourself, your family, your employees, shareholders and others you care about. It’s just part of the job.

Startups can be stressful and chaotic.

Also, part of the job is dealing with manufacturing or software issues, research disappointments, unexpected competition and probably worst of all, the question will be, "Will we be able to meet payroll this week?" Companies don't go out of business because of losses. They disappear because they run out of cash and can't meet their obligations. Always remember, cash is king. Growing businesses suck up cash.

Competitors buy your customers, you need to litigate to protect your intellectual property, environmental issues are getting tougher, specialties become commodities and there is often someone willing to engage in price wars or pay off that buyer.

As a public company, we had to conform to SEC regulations and carefully share information (without disclosing insider information) with analysts and shareholders. It was generally harder when the stock was down.

Fortunately for us, I had the foresight to under promise and over deliver. When we were written up by Forbes Magazine as one of the fastest growing companies in America and got favorable press in Fortune Magazine, the stock took off. I then told our shareholders that the price rise was not based on earnings expectations, but limited supply and too much demand for the stock. That bought me credibility. If we had major research programs, I told them that earnings will be flat until the programs came to fruition and that there are no guarantees. Eventually, the stock rose from $3 per share to $58 and split.

We were an FAA Repair Station so I had to be prepared for spot inspections by stringent inspectors who reminded me that they could pull our ticket for serious infractions. There was never any compromising of quality on our part since lives were at stake.

We were good to our people and both the Teamsters and the Oil, Chemical and Atomic Workers couldn’t unionize us although I reminded our employees that if they wanted a union, go ahead and vote for it and pay union dues, but we are giving them everything we can anyway. We were publicly held so information on salaries and benefits were transparent. The top and bottom salaries were not that far apart. Much of my money was made on stock options and my IRA so I had to perform. I tried to keep as much cash in the company and I cringe when I see some salary differences and excesses today.

We also dealt with the EPA and they kept us on our toes although the regs kept changing and it called for major capital expenditures on our part. In the very beginning, I worked in the plant part time. We couldn’t afford the proper acid fume scrubbers or dust collectors so I often went home short of breath, coughing up black dust. It made me prioritize improvements so that our people did not have to deal with that experience.

You’ve heard the expression, If it’s Tuesday it must be Belgium. Well, sometimes it was Pittsburgh, Boston, Cleveland, Detroit, Chicago, Houston, Grand Rapids, Utica, North Platte, Seattle, Toronto, Madrid, Brussels, Copenhagen, Dusseldorf, Stockholm, Moscow, Beijing or Yokahama.

Hard work has its dividends and there was a lot of satisfaction in meeting interesting people along the way. I managed to form some very durable and long-lasting friendships. It is part of my network. I hope it keeps growing.

Once, our flight had to set down in Harrison, AK. because Fayetteville, AK was socked in with fog. I managed to get the last rental car. A gentleman asked which way I was going and asked for a ride. I said "Sure, put out my hand and then said, ", I’m Ira Friedman." He shook my hand and said, "I’m Sam Walton. Where are you going he asked? I replied, "Rogers." He wistfully said, "That’s where I opened my first Walmart." I dropped him at his little red pickup truck in Bentonville.

General Tire and Rubber Co. and their subsidiary Aerojet General owned 20% of us. General Tire makes Penn Tennis balls so whenever I needed them, I called one of our directors. He would send me a case of balls. I kept a promise to him that he would get any bad news right away. He said, "Early on maybe I can help the situation. Too late and I probably can't. Never blindside me." I never did.

On a visit to Aerojet HQ in El Monte, Cal. I was asked if I would like to have lunch with Admiral "Red" Raborn. Aerojet made the Polaris rocket. The Navy wanted nuclear submarines to carry them so he hired cantankerous, but brilliant Admiral Hyman Rickover. Within two years, the Navy had the Nautilus. That’s how we got our nuclear Navy. (One of the engineers Rickover hired for the project was Jimmy Carter).

After his retirement from the Navy, JFK asked Admiral Raborn to run the CIA so he said, “I went from swabbie to spymaster in one day.”

My principal contact in Belgium was Albert Diels. Albert had been a leader in the Belgian underground in WW II. He was a world renown chemist and expert in demolitions. He ran Planichim which was the Société Générale’ Company for acquiring and divesting new technology in Belgium. Thanks largely to Albert, and his understanding of our technology, they built a plant in Belgium which is now the world’s largest producer of high alloy metal powders.

Coldstream Europe, Ath, Belgium

Our kids used to spend summers in Belgium and my Belgian managers sent their kids here. Next summer our GM’s son is coming to visit us with his family. He has been an engineer with Renault. I attended our GM’s daughter’s wedding in Ghent. She is now a physician as is her mother. The groom’s father thanked me for coming. I said it was my pleasure. He said, “Without you Americans we wouldn’t have a life worth living.” That comment was worth the trip.

Bottom line, we all work hard. We need to continue our education. Never stop learning. 20 years after graduating from Lehigh, I completed Harvard Business School’s Owner President Management Program. Last year I had the honor of attending the Army War College in Carlisle, PA.

One of my HBS professors liked me a lot and asked to come on our board. At dinner in Boston he convinced me to sell the company so I formed Material Technologies and now advise others on strategy, intellectual property and how to stay out of the minefields. I pass on my knowledge and experience to others.

My advice - stay healthy. Work hard. Be creative. Give your clients or managers their money’s worth. Keep learning. Take reasonable risk. Be there for your friends and family. Always be truthful - even when it hurts.

There is a cost to building a business. It can also be very gratifying. Be prepared to pay the price. No pain, no gain.

What do you think?

Ira Friedman