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Last Update: Thursday September 20, 2018

Key Idea: Work Your Way Into Ownership

After ten years of working at Ironbound,  Howard Kent gained a new appreciation for the profitability of pipes and arranged to buy the business.

Key Question:

A: 

Prove yourself worthy with your extraordinary performance.

Howard's father-in-law knew the niche. He knew there was money to be made in distributing pipes, vales and fittings to the commercial construction industry so he set up the company and recruited Howard to run it. After 10 years, Howard had many customers and a wide product mix but felt he should not just run the business, he should own it.

Q:
Why was it a good idea to sell the business to Howard?

A: Howard had proven himself and did not ask for, "the family discount." Howard approached the buyout in a professional manner. They set up a 10-year buy out plan and Howard achieved the goal. Twenty years after starting with Ironbound, he became its owner, free and clear.

More importantly, selling Ironbound to Howard made Howard stronger. Emotionally, Howard needed to be the owner. He was running the business on a day-to-day basis and had grown it past the expectations of the founder. Howard's father-in-law has another business that and is still a customer of Ironbound today. Besides, the father-in-law could see his own life getting shorter. Why not give the next generation an opportunity to shine?

Too many founders hold on too long. It is discouraging and even heartbreaking to see men and women in their 50s or even 60s who have not been given a chance to lead. Frankly, if the founder can't fully turn over part or all of a business to their sons or daughters by the time they have reached 45 or 60 years of age, the founder will never let go. This type of entrepreneur will die at his desk. We advise the younger team to get out of Dodge!

Think about it

Who could you sell your business to? Who should you sell your business to? What should you do now to prepare the future buyer?

Clip from: Ironbound Supply

Newark, New Jersey: Meet Howard Kent and his team at Ironbound Valve Actuation. Like most of us, he learned his lessons the hard way. He now says, "Plan your work. And, work your plan, so . . . when you do succeed, it's not by chance and it's not by luck; it's just that you followed your game plan."

As you can well imagine, to go global, Howard constantly streamlines his systems with a mixture of old technology and new.

Go to the key ideas of this episode...

Ironbound Valve Actuation

Howard Kent, Chairman, CEO, founder

146 Jackson Street
Newark, NJ 07105
9735895209

Visit our web site: http://www.ironbound.com

Office: 9735895209

Business Classification:
Retail/Wholesale

Year Founded: 1966

Work Your Way Into Ownership

HATTIE: (Voiceover) Tell me how this all started 30 years ago.

HOWARD: Well, my father-in-law, who is still in business--he was a big heating-technician contractor--and he decided to maximize his profit. He would like to buy direct from the manufacturers. Well, they wouldn't sell a contractor direct; they only sell supply houses direct. So he said, OK, he'll open up a supply house. And I was working for a corn products company at the time and, lo and behold, after a year, I became the Eastern regional data processing manager for corn products, and I was looking to leave, and my father-in-law said, `I started this business, someday this may be yours, you should learn something about it.' And I said, `OK.' I left there, and I came to work for what I thought was, like, the old-time country store. There was no pots and pans hanging from the ceiling, but pipe fittings and valves and everything else didn't seem to be a very elaborate way to make a living. And we only had one customer at the time, which was...

HATTIE: Your father-in-law. Right.

HOWARD: ...his own company was selling to the family; had no inventory, so to speak, no trucks, no equipment. So we had one customer and, little by little, we started to look for other customers and found out that there's a need for these items and found out it's a very profitable field to be in. And then through the years, as things evolved, we ended up picking up more products and more lines and a lot of customers. My father-in-law is a customer today. They're still in business, he's still running the business. He's now 80 years old.

HATTIE: Wow.

HOWARD: So that means that business has been successful, or over 55 years in business. And many things have changed through the years, yet our community here in the ironbound is the same, and I'm still selling the same pipe valves and fittings that I did 30-some years ago. It's just the way that we keep track of it and--and look for that business that has changed; the marketing of it has changed.

One of the major reasons that I did leave, -- I was 25, married and my wife was pregnant at the time -- we had to think of my livelihood for the future. But I did find, coming into the archaic business, that it was very profitable and you could make money, and that within two years, three years, I could be making more money than I could have for a big corporation going up the corporate ladder and having a lot of people to answer to, where here I only had to answer to myself. So I decided if I put forth the effort, let's see what happens. And after one year, I was firmly convinced that this is something I thoroughly enjoyed because it wasn't work, although I would get in at 7 in the morning and leave 5:30, 6:00 at night, and that was six days a week. But the rewards were for my family because we got the financial rewards and I was getting the pride, the fulfillment, the things you can't measure in dollars and cents, besides the money on the bottom line. So I was very happy that I made that career move.

Ten years went by, and we had a lot of customers, a lot of inventory, had employees, and I went to my father-in-law and said, `Jeez, Dad, you know, you own the business and I'm just your son-in-law. How about selling me the business?' And at first, he was adverse to it; and we made an arrangement and I bought the business from him. And at that point, I really felt a sense of pride because now I'm 35 years old and going to buy the business over a 10-year period of time from him, so by the time I'm 45, I'll fully own the business, and it's up to me to make sure that during that 10-year period of time it's successful because I got tosupport my family, but I also have my obligation to pay back the loan on the business.

HATTIE: Right. So he carried the finance. I mean, he financed it.

HOWARD: Right.

HATTIE: He carried the payments.
 

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