This article is the third of a series sponsored by PNC Bank. Over the coming months, we’ll be engaging with CEOs from around the U.S. on some of the most important topics facing business leaders today. Click here for part 1 and part 2.
As the U.S. economic boom gains traction, CEOs continue to gear up their companies for growth in the months and even years ahead. They seek to optimize opportunities being created by strong consumer confidence, rising wages and incomes, lower federal taxes, a more forgiving regulatory environment and a millennial generation that is coming into its own financially.
CEOs are feeling their companies’ oats. According to a new survey of 400 American CEOs by KPMG, a full 77 percent are “very confident” in the growth prospects over the next three years, up from 46 percent just a year ago. Nearly half of those executives expect growth of up to 5 percent over that period.
But most CEOs won’t be content with just organic growth, which was expected by only 22 percent of those surveyed. Thirty-six percent professed a “high M&A appetite.” Setting up accelerator or incubator programs was on the agenda for 46 percent of the chiefs. Alliances with third parties were expected for 23 percent.
Here’s how three CEOs in very different industries are approaching growth:
Bob Martin, CEO, Thor Industries: The CEO of America’s largest producer of recreational vehicles, based in Elkhart, Ind., sees a welcoming road ahead based on rising disposable incomes, the maturation of Generation Y into the heaviest spending stage of their lives, and the widest-ever-available range of campers, trailers and other RV forms.
Though $4-a-gallon gasoline a decade ago nearly killed his industry and devastated northern Indiana where most are built, $3-a-gallon gasoline doesn’t particularly scare Martin this time around. “People just won’t go as far away on their trips,” he says.
Neither is Thor counting on exports: American-style RVs are basically, well, an American-style thing. And millennials are finding new uses for them, such as providing a place for the kids, their friends and parents to hang out on those long weekends away from home for travel sports leagues.
Thor is investing in bullish prospects in a number of ways, none so bold as the $40-million, 750,000-square-foot expansion of its Airstream factory in Jackson Center, Ohio. Financed internally and subsidized by state renewable-energy credits, the addition – including a new training center and a museum dedicated to the iconic, pricey “silver-bullet” brand that’s popular with celebrities – will bring employment at the site to about 1,200 people.
“If our industry were to slow down as during the last recession, it’s big motor homes and large Airstream units that would see it first – our leading indicators,” Martin says. “But right now we’re seeing the opposite: unprecedented demand for Airstream.”
Karl Worley, Founder, Biscuit Love: The chain of Southern-style home-cooking restaurants in Nashville began as a local food truck in 2012, and now Worley and his wife, CEO Sarah Worley, are plotting how to keep expanding beyond three bricks-and-mortar locations.
Staples for breakfast through lunch include the Instagram-worthy Southern Benny, featuring biscuits and eggs with ham and sausage gravy for $10, bananas foster oatmeal for $8, and cheese grits for $3. Denizens of other Tennessee cities and even surrounding states have been clamoring for Biscuit Love to come to their communities as well.
So, growth was on the menu nearly immediately. And a year ago, the Worleys considered expanding to Charleston, S.C. They recognized that they’d come up with a winning concept in a cutthroat fast-casual restaurant market, and one with lower costs than normal because Biscuit Love eschews dinner.
But instead of quick expansion, they decided on a deliberate approach that emphasizes organic growth through top-shelf execution in their current Nashville locations, including building a nurturing internal culture.
“We envisioned what our company would look like in 2025 and, backing up from there, we realized that our training wasn’t there, and our management staff and really the backbone of the company wasn’t ready to grow yet,” Karl Worley says.
For future growth in time, they’ve created a partnership with Fresh Hospitality, a Nashville-based investment company that helps restaurant concepts grow by providing financial and intellectual capital. “They have back-of-the-house systems that help us know our food costs every week and our labor costs every day, for instance,” Worley says. “There are a lot of tools I wouldn’t have access to as a three-store operation.”
Rob Hrabe, CEO, VRC Metal Systems: A former B-1B bomber pilot and engineer, Hrabe co-founded the company in Rapid City, S.D., in 2013 after obtaining an exclusive license for the commercialization of a patent-pending process that essentially amounts to spray-on welding. It shoots microscopic metal particles through a tight aperture at the speed of a bullet so that kinetic energy can join disparate types of metals in ways that conventional welding can’t.
In just five years, VRC has grown to a run rate of a projected $20 million by the end of the year and 55 employees. That’s thanks to booming demand from industries including aerospace and defense, and oil and gas production, for the VRC machinery that enables the process, enabling effective and relatively inexpensive repair of an array of corroded and worn parts.
Sales have doubled each year for the last three years. About 40 percent of VRC’s sales are commercial these days, 60 percent government; Hrabe is aiming to flip that to an 80-20 ratio within a few years.
“We bootstrapped the whole thing,” Hrabe says about the company’s origins, using military R&D contracts and customer-financed development work, for example. And he’s “hoping to self-finance” as VRC expands further.
But VRC is encroaching on the limits to such methods, and so “we’re looking to potentially bring on some investors,” Hrabe says. Private equity will be preferred, and especially outfits that “can help us out in certain industries where we’re looking” for market share.
If he can get the financing right, the sky’s the limit, he believes. “We are expanding into power-plant repair, refineries, mining services,” he says. “Wherever there is corrosion and wear on metals, our technology has some game.”
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