This article originally appeared on the blog of the Acton Institute, a thinktank based in Grand Rapids, Michigan. Please check out their site at https://acton.org/about.
Of all the schools founded by Robert Luddy, author of the new book Entrepreneurial Life: The Path from Startup to Market Leader, not one of them has a cafeteria. The schools have gyms and Apple TVs, but none of the facilities needed to provide lunches each day. Yet, when I show visitors around the campus of Thales Academy, a chain of private schools Luddy founded in 2007 where I teach, the absence of a cafeteria is actually a bonus I am proud to highlight to our guests. A cafeteria, with its equipment and personnel, would drastically increase operating costs for each school, costs that would be passed onto parents through higher tuition rates. Ironically, Luddy built from the ground up North America’s largest commercial kitchen ventilation equipment company, CaptiveAire, so he could outfit his schools with the best kitchens imaginable. But doing so would stifle the single, overarching goal Luddy has pursued his whole life, from building CaptiveAire to founding a network of affordable private schools: creating products with the greatest possible value at the lowest possible price.
Creating value is the moral of Entrepreneurial Life, Luddy’s story of CaptiveAire from startup to industry leader. Luddy weaves into the narrative the principles that made Raleigh, N.C.-based CaptiveAire flourish and includes many words of thanks to countless employees and family members who contributed to its success. Unless you own a restaurant you may not have heard of CaptiveAire, but after reading Luddy’s book or this article you may be more likely to look for their distinctive red logo on restaurant kitchen hoods, and with CaptiveAire’s customers among the most popular chains, you’d almost certainly find it in the restaurants you already frequent.
Founding the company in 1976 and working out of his garage like any good entrepreneur, Luddy poured “sweat capital” into the then-named Atlantic Fire Systems. That is, he reinvested any profits from his hard work back into the company to keep it going. He survived only by keeping costs, and thereby prices, low and providing the best possible customer service of which Luddy (the only employee) was capable, even making maintenance calls on Christmas Day. Initially Atlantic Fire System sold and installed fire suppressants, and only moved into kitchen ventilation equipment to gain new customers and market share.
The break came when Luddy realized most kitchen ventilation manufacturers did not produce hoods of the quality needed for modern kitchens. Such equipment is responsible for removing smoke and grease from the air and if these hoods are not made well or do not provide adequate airflow, kitchens easily turn into grease-choked hothouses. Luddy, with his family depending on him, jumped to fill this gap in the market and set out to produce high-quality hoods at prices low enough to attract customers. Sales grew by sticking to the principles Luddy emphasizes throughout the book: create products with the highest possible value at the lowest possible cost, never settle for the status quo, and always stay focused on the customer’s needs.
The second half of Entrepreneurial Life focuses on the business practices and habits an entrepreneur should cultivate to build a business to survive in a highly competitive environment. For instance, Luddy outlines an “Empowered Employee” philosophy and a lean, decentralized management structure as key components to encourage growth and innovation. Entrepreneurs should set the example for continuous improvement and root out the kind of corporate decay that sets in when the “way we do things” is privileged above the way we could do things, but haven’t figured out yet. To that end, Luddy encourages his staff, even engineers new to CaptiveAire, to email him with ideas that could create new products or improve customer service. For Luddy, a successful entrepreneur should relentlessly pursue quality for customers and employees alike and help everyone within the company’s orbit maximize their potential.
If you read Entrepreneurial Life to find the secret to getting rich, however, you may be disappointed. Aspiring entrepreneurs should cultivate the habits people are often trying to avoid when they scan the memoirs of wealthy businessmen to find formulas for success. Arriving at work an hour before everyone else, maintaining rigid and honest bookkeeping practices, and reading at least one book each month are the habits of successful businessmen, with no shortcuts to success apart from continuous improvement. In this way Luddy’s Entrepreneurial Life reads more like The Autobiography of Benjamin Franklin than any contemporary business memoir, as Luddy explains how the path to success is paved with hard work and thrift in a way that would have made Franklin proud. For the entrepreneur, a successful business comes about only through persistence, dedication, and self-improvement, and there are simply no shortcuts in a marketplace where inferior products are easily passed over. Entrepreneurs must work hard to develop products customers want, not simply get rich.
Many people look at entrepreneurship and profit-seeking with suspicion, even envy and some disgust. This is more than unfair, since profits merely reflect the value customers place on goods and services, a value that entrepreneurs can increase by providing a better product at the lowest possible price. In writing Entrepreneurial Life and sharing the story of CaptiveAire, Luddy presents himself as an example, not a formula, for readers to imitate. Not only must entrepreneurs work harder than their competitors, they are engaged in a daily struggle to identify trends no one else sees, provide goods customers have not yet realized they want, and create products more valuable than the money customers would otherwise keep in their wallets. Certainly running your own business is a difficult task, but as many friends and colleagues told Robert Luddy when he was just getting started, “You’ll figure out how to make it work.”