So You Want to Own Your Own Company?
Owning and operating a chemical company has been something I have always wanted to do. When the opportunity arose to purchase Polysciences, to use a popular poker playing term, I was “all in.” My wife, Ginger, and I risked everything and so it worked because it had to work.
My only other job was at Rohm and Haas, a large international chemical company. My experience with Rohm & Haas began as a Purdue chemical engineering co-op student and took me through various domestic assignments as well as living in New Zealand and Mexico. Those experiences count a lot toward understanding what really matters when there is no one else but me to decide what to do.
The most important thing in a small business is cash flow. The definition of cash flow is current assets minus current liabilities. It determines if you can make the payroll and pay all the bills on time. For instance, you might think you are doing well because you have growing sales, but if you don’t collect the money in time from your customers, you will not be able to buy more raw materials and build more inventory so, in turn, your business will disappear. At my company, Polysciences, I have been very fortunate to have always enjoyed a very positive cash flow.
The capital requirements of a manufacturing company are constant and growing. Machines that are used to make products are called factors of production. To the extent that they are expensive machines, they are barriers to entry into the market in which you participate. If you do not have a winning lottery ticket or a rich uncle then you may have to borrow money or seek money from investors. A bank is always preferable to investors who will want equity in your company. Banking relationships are very important as all loans are personal loans based on trust. Keep the trust of your banker and you will have access to capital when you need it.
Many small companies depend on one or a few customers or products. Often such a business is at tremendous risk as the single product or customer can be substituted or lost, and replacement takes time. I have always strived to stay diversified with many products and customers. I prefer to develop new customers to growing current customers past 5 percent of the annual sales
of my company.
No matter what, if you are in business, you will have problems. After all, we are engineers and solving problems is our reason for existence. Many times discouraging events will tempt an independent business person to throw in the towel. Don’t do it! Just keep going. The only time you really lose is when you give up. Fortunately, operating a business is not a ChE 305 test, and you will have enough time and access to enough help to solve your problem as long as you just keep going.
– Michael H. Ott
(BS ’73; CPA ’77, University of Maryland; MBA ’80, University of Chicago; DEA 2007, Purdue University).
Polysciences has grown from $6M in sales and 60 people in 1993 to $25M and 150 people in 2007. With operations in Pennsylvania, Indiana, and Germany, it is a diversified small specialty and fine chemical operation serving the medical and electronic materials markets.