A successful forced entrepreneur

István Losonczi liked to be an employee, he has always been an engineer but in almost two decades he managed to create of the most successful enterprises of Békés county. He is the founder and manager of the Losonczi Kft. His secret might consist of doing what he likes, he is not for the money and wanted to establish a lovable workplace.

The preparation of a good tool needs many spoiled tools – István Losonczi is confessing. He was lucky by the fact that by the time he founded his own company he had already passed the period of the spoiled tools. He learned from his earlier mistakes and among his customers he already boasts with giants like the Audi Hungária, the Atomic power plant of Paks or the GE Hungary. If somebody is looking the history of the Losonczi Kft. and its founder everything looks simple. But as behind every success that looks “normal” there is a lot of tough work and a series of smart decisions.

Spoiled privatisation
István Losonczi graduated as a mechanical engineer and in 1981 he started working in Békéscsaba at a tool-making company. (Before that he had spent 3 years at the construction of the Atomic Plant of Paks, too). According to his habit looking for the new he got to the development department and a few later he became the manager. As he says here he learned the shaving tool-making trade and became obsessed with the area he has been loving ever since: making of the special shaving tools.

This is where he faced the change of the regime which caused the privatisation of the company and brought a new Italian owner. István Losonczi remained with the company, it did not cross his mind to start his own company. „I always liked to be an employee, I did not want to become an entrepreneur.” Then the necessity made him to change his life. The company that was employing 300 people at the privatisation, having good capacities and prospering well kept losing its markets and the best employees. István Losonczi thinks the biggest problem was that the owner took out the profit immediately, very little was reused for development – it was a lesson to remember.
He felt badly, he did not like the atmosphere, being held responsible for errors he had no influence over. „I felt I shouldn’t continue because I had stomach problems every morning when I went to work. Now I am grateful it happened like this because if the situation is not that bad, maybe I am still there.” His example proves the old saying: everything bad has something good.

Standing on his own feet
A job in Budapest came handy: a commercial company was looking for a technical adviser expert in shaving. But it turned out fast that they wanted him as an entrepreneur only and the travelling agent style was not for him. So in 1995 he became independent and he established the Losonczi Kft together with his wife and she was the only employee during the first years.

At the beginning the company was also dealing with tool trading but for István Losonczi this was always a compulsory activity compared to the designing and manufacturing of tools, with special regard to the special tools. That is why he started again to design tools and tried to have them manufactured by other workshops. But this was always troublesome, so finally he decided to enlarge the activities of the company, and establishes his own manufacturing capacity.

Lacking the sufficient capital the company took out a START-loan: the then-huge amount of HUF 12 million (and the personal savings) was enough to procure the proper “silly” designing software version and a used milling machine reconstructed in the 5-axis version. This has become a company that employs 27 people in its own manufacturing hall of 1350 sqm at a European level where a 120-million HUF Studer CNC grinding machine was implemented in March.

The Losonczi Kft. in a nutshell
In 2012 the revenue of the company was HUF 360 million, the profit was HUF 44 million. Last year the revenue was slightly lower because of the construction of the new Hall and the relocation of the machinery, but this year the company is expecting a turnover that exceeds year 2012. Currently there are 27 people employed by the company, the current enlargement involved six new jobs.
All the important players of the industry can be found among our customers. Some of them: Alcoa Köfém, Audi Hungária, FAG Magyarország, Paksi Atomerőmű, GE Hungary, Grundfoss Magyarország, Hungaro SLR, Kennametal Hungária, Knorr-Bremse Fékrendszerek, Linamar Hungary, Rába Futómű Kft, Sandvik Magyarország, Siemens.

Winner of tenders
During the past 4 years the Losonczi Kft. had won six union tenders in various operative schemes (TÁMOP, GOP, DAOP), out of which 5 have already closed, The biggest, the recently finished hall construction: they received a non-returnable grant of almost HUF 100 million for the 300-million investment.
István Losonczi thinks the success is due to the tender-writing partner. In his opinion all the administrative burdens are removed from his shoulder, the only things he has to deal with are the realisation, the technical content and the signature. And as a reward he is paying the agreed fee; ”I don’t think I am not obtaining 6.5 million out of HUF 100 million, I think I gained 93.5 million” – explains the tiny but significant difference.

- Why did you start to make special tools?
I was already dealing with this before the change of the regime. There are few people able to make a really good special tool because this needs special know-how and experience. Everybody can buy a milling machine and the designing software if the money is available. But the invention of a special tool is rather art: how we should create it, how we should place the clamp-tip, what edge-angles we should apply for obtaining the optimum shaving. This is what I am good at, this is what I consider exciting and of course this is paid better by the market. With a special tool a certain part can be made in 6 minutes instead of ten, and there is need for only one tool instead of two. Just think how much savings it means for an automotive factory when they have to manufacture 500 thousand identical parts.

- How can a Hungarian small company have a word in this market?
The majority of our customers are big western tool-makers that are already present in Hungary in some form. They have their own is special tool-making department but they are often burdened, and sometimes they need 2-3 months to deal with a new order. In this situation they are contacting us asking whether we could cope with it – and we are delivering in 5-6 weeks. Cheapness is not the most important factor: quickness is the main thing. And of course when considering the quality one should not able to tell whether it was manufactured in Switzerland or Hungary.

- How was it possible to obtain the trust of these foreign companies?
It was not easy, we had to keep persuading then telling that we can provide quality. The network marketing helped a lot, I had a lot of acquaintances at several companies, but it would have been worth nothing if we do not keep our promises, if we do not manufacture good tools. But when they learned our name they began to trust us, the client recall our name more easily. It is a fact that while in the industry 20-30% of the propositions are winning in average, in our case this number is over 50% and we are not famous for our cheapness. At the beginning we were boosted by the contract concluded with INA in 2000 that tied our capacity for 3 years – and through this we were able to buy five tool-machines at the same time.


„…I am taking out the most necessary money from the profit, the rest remain for development purposes”

- Are there technical obstacles for fulfilling the orders, can you always fulfil all the needs?
Nowadays the situation is much better that shortly after the start, but we still don’t have so much money to always buy the best and newest software and tools. But this is not such a disadvantage as the lay people would think. Regarding the special tools it is the human expertise that matters, not the technique. And we are good at it. I can say that our employees are more educated than the Western colleagues and the fluctuation is extremely low.
And we need a machine for the processing that would not be used at us, then we have the partner to whom we can entrust certain special work phases.

- You are a genuine engineer‚ we can say you have become an entrepreneur being forced to. What are the business principles and the strategy according to which you are managing your company?
I learned from the mistakes that were committed by the Italian owner of my earlier company. One of the most important things is that I take out the profit that is absolutely necessary, the rest remains for development purposes. Now I am still living in the same house we built back in 1986, I don’t have a weekend house, a sports car or 4WD vehicle.
The other important principle says I am not over-considering the economic issues: I try to handle the business with an engineer’s approach and rationality. I always checked the revenue, the profit and how much can be reused for investment. I am sure it could have been possible to develop faster, buying machinery or building from loans but I think I shouldn’t use the money that is not earned. When I tackle something I want to see the end, too: I don’t want to build a hall and see my money gone at half-time. I am also proud of paying my invoices by deadline, which is not quite common among the Hungarian entrepreneurs.
And our business model has another element: standing on several feet. When the manufacturing of special tools got started, we discovered new areas. The first of this kind consisted of designing and manufacturing the special tools serving for gripping the work-pieces. In 2005 we started to make special measuring devices for automotive industrial suppliers that need only a few minutes to check all the required dimensions of the parts and record them in the computer. The three activities complement each other rather well and if somewhere the demand falls back, the missing revenue can probably be provided from the other two areas. Partly this is why we survived the crisis quite easily and only the year 2009 was a bit without profit.

- In 2004 you are the Entrepreneur of the year. Is this what you consider the best recognition?
I wouldn’t say I wasn’t happy about that since earlier I had not received any award or recognition, and it confirmed that according to others I am doing well what I am doing. But I think it is a bigger recognition for me that during the 18 years there was only 1 person I had to send because the employees think the company success is close to their heart, and I think the same way. It is characteristic that many of them are showing the new hall to their spouses or children – they are to work here. Everybody is adding the maximum expertise to the joint work, nobody has to be nudged. I managed to establish a company with an atmosphere where I always wanted to work when I was an employee.

Schopp Attila