MARKETING

Making Money, Raising Money

An electronics company comes close to its sales projections after a year in business.
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You've got to give Wallace Leyshon credit. Not only is he challenging assumptions about how his industry can work, but he's making money while doing it.

Leyshon's company, ACT, manufactures those electronic controls found on such appliances as microwaves and washing machines. When it was profiled in January 1989, the company was setting out to do sales of close to $19 million in 1989 with a strategy of onshore manufacturing (more advantageous than offshore, said Leyshon) and closer alliances with big-company appliance designers (to explain the options in control design more extensively). So far, something's working: with 1989 sales reported at close to $17 million and profits of just under $1 million, ACT is right in the ballpark of its plans.

"This year we'll finish as probably the number-two player in our business," says founder, president, and CEO Leyshon, "and we'll have at least an estimated 14% market share, based on units." Credit, he says, low field failures of the control systems, a 4- to 6-week turnaround on new products versus what he says is the 12- to 16-week industry norm, and ACT's stateside supply, which lets customers keep low inventories.

"We're probably a dull story because we've been fortunate to stay close to what we projected," says Leyshon. For instance, onshore manufacturing has indeed proven cost-effective: Leyshon says ACT achieved its targeted operations costs per unit. "Based on my experiences at Motorola, I didn't have any reservations about achieving our targets," he shrugs, noting that two major competitors have moved their facilities from offshore back to the States.

What's more, big-company customers have begun bringing ACT in on the design process earlier than is typical. "Our contacts still always start with the purchasing department," says Leyshon, "but we're participating closer to the inception of the design, so we can establish trade-offs that allow us to produce the product at a lower cost."

Staying on track hasn't been without its costs, however. A year ago ACT was working with $3.3 million in funding, planning to finance growth through cash flow and lines of credit. But the company is now in the process of closing an additional $5-million private offering for about 18% of the company. Why? Leyshon says there's a need -- one that he didn't expect -- to keep big-company customers from being too nervous about buying from a small supplier.

"The primary reason is just to enhance our balance sheet," he says. "To make certain we demonstrate the wherewithal to serve the appliance business. Consumer durables has its ups and downs, and the people who we deal with, like GE and Electrolux and Whirlpool, want to see that." The money will also be used to finance growth, including a move to a new 100,000-square-foot facility within the next year, a year earlier than originally planned.

Managers still remain the largest group of shareholders, and for now Leyshon's not worried about control. "As long as the honeymoon continues, and we enjoy a good operating situation, there's not a whole lot of people who have opinions on how to run the business."

With the extra money, 200 employees, and a recent state of Illinois Peat Marwick Main high-tech entrepreneur award, Leyshon anticipates 1990 sales of some $38 million, what he projected a year ago. Dull? More like smooth and steady. "We enjoy executing this thing," says Leyshon. "We take seriously the responsibility to a lot of employees who are risking their careers." -- Leslie Brokaw

* * *

THE COMPANY

Appliance Control Technology Inc. (ACT), Addison, Ill., a manufacturer of electronic controls for the appliance market ("Made in the U.S.A.," January 1989, [Article link])

Experts' Concerns

* Manufacturing: Can ACT's onshore production be cost-competitive?

* Marketing: Will big-company customers take to including ACT in their design processes?

Results to Date

1989 Actual Projected

Revenues "Just over $17 million" $18.9 million

Profit "Just under $1 million" $1.4 million

Last updated: Feb 1, 1990




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