So you want to be an industrialist?

The Basics of Running an Industrial Business

So, you've decided to become an industrialist—that's fantastic! I'm thrilled to hear it.

Here are a few things I want you to know, lessons I've learned over a 15-year career working in the industry. Every industrial business shares the same fundamental principles. Master these, and you'll not only generate massive wealth but also build an incredibly strong business.

1.) There is Power in Focus: I've had the pleasure of working for a Fortune 500 industrial company, numerous large privately held businesses, and several small yet robust industrial firms. They all built strong reputations by excelling at something specific, whether it be category-defining products, extraordinary commitment to speed, low prices, or high customization. I've never seen a company that's 'sort of good' at many things succeed in this market. Why? Because customers need to associate your firm with a particular strength. Once you establish your niche, maintain a relentless focus on that area and continuously raise the bar. A common mistake I've seen is companies attempting to cast wide nets, thinking, "If I've got the equipment, I'll give it a shot." These companies often struggle to master anything, attracting commoditized work that pits them against every other middling company, leading to financial challenges and difficulties in sustaining the business. Successful pivots in strategy are common but should not be knee-jerk or too frequent, as focus remains a core hallmark of the corporate identity.

2.) Know Your Numbers: Long-lasting, profitable industrial businesses have a solid understanding of overhead absorption. Managing people, equipment, inventory, and processes incurs significant costs. It's vital to build an accounting system that clarifies these fixed and variable costs and how different revenue streams efficiently absorb them. If assets aren't generating cash and there's no clear, sustainable path to profitability, it's often wise to divest these assets and redirect resources towards more vital assets. There's a critical mass of people, equipment, and expertise needed to sustain a process. Typically, the revenue needed to adequately absorb these resources is about 5-10 times the incurred costs. If this isn't happening, it's crucial to make decisions that free capital, time, and energy, allowing positive resources to thrive without the burden of non-productive ones. Remember, more isn't always better; often, less is more.

3.) Cultivate a High-Performance Culture: The industrial business sector is challenging due to its complexity. Supply chains, volatile personnel, demanding and sometimes fickle customers, and high capital requirements all contribute to this complexity. This environment demands specific personality types capable of high-quality work and problem-solving. In industrial businesses, you can't just 'mash the gas and let off.' There's no respite. You must learn to manage stress, pressure, and complexity with grace and skill. This type of work isn't for everyone. Promptly placing people in roles where they thrive or, if necessary, moving them out of the company is critical. Lingering mismatches can harm both the individuals and the business, both culturally and financially. You can't afford to keep the wrong team in place for an extended period.

4.) Have a Passion for It: A friend and mentor in business described his passion for his work eloquently. His company manufactures parts essential for major heavy equipment OEMs globally, contributing to feeding, maintaining, and building the world's infrastructure. Without his firm's commitment to quality, the world would be less safe and productive. His palpable passion as a leader resonates with his team, leading to a positive response. In turn, the market responds with loyalty and ever-increasing opportunities. If you don't genuinely love your work and understand its critical role in the world, it's challenging to persist, innovate, and scale.

It's my hope that this short writing helps to encourage, inspire, or refine your operating thesis. Take these learnings and positively impact the world, your family, and your legacy with your industrial business!

-David