Latest / Family Business Stories with Fexingo: Succession, Legacy, and Multi-Generational Companies / How the Hilti Family Built a Tool Empire on Service
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- Lucas: So you're on a construction site — high-rise core drilling, concrete dust everywhere, deadline in 48 hours — and your hammer drill dies. What do you do? Luna: You panic. Or you call the rental place. Maybe you hope the foreman has a spare. Lucas: Right. But if you're a Hilti customer, you don't panic. You call Hilti Fleet Services. A van shows up the same day with a replacement tool, you hand over the broken one, and you keep working. You pay nothing extra. That van is a major reason Hilti owns about a third of the global market for high-end construction tools. Luna: And this is not a startup. Hilti has been around since 1941. Family-owned the whole way. Lucas: Founded in Schaan, Liechtenstein — that tiny principality between Switzerland and Austria. Martin Hilti started it as a small workshop making wooden stencils for Nazi-era construction. Not exactly a glamorous origin. But after the war, he pivoted into fastening tools and drills. By the 1960s, Hilti had this innovative direct-sales model — no distributors, just company-employed engineers visiting construction sites. Luna: That's expensive. Why not use dealers? Lucas: Because Martin believed that a rep who understood concrete chemistry could sell more tools than a hardware-store clerk. And he was right. By 1980, Hilti had 10,000 employees and a billion Swiss francs in revenue. But here's the interesting part. In 2000, the company made a bet that seemed insane at the time. Luna: The fleet switch. Lucas: Exactly. They stopped selling drills and started selling access to drills. You pay a flat monthly fee per tool, Hilti handles all repairs, replacements, and even tool theft. For the customer, it shifts from a capital expense to an operating expense. For Hilti, it shifts the incentive — they want their tools to last longer and break less, because they own the maintenance cost. Luna: And it worked. Hilti went from a 70% one-time-purchase customer base to 80% on fleet contracts within a decade. Lucas: I mean, 97% customer retention. That's almost unheard of in any industry. The fleet model also gives Hilti real-time data on tool usage — which tools get abused, which jobsites need more torque, which battery tech lasts longest. That data feeds back into R&D, and Hilti spends about 10% of revenue on R&D, which is double the industry average. Luna: So they're essentially a construction software company that also makes hardware. Lucas: They'd probably say that. They now sell on-site software for project management, inventory tracking, even BIM integration. But the hardware is still the core. About 30,000 employees, revenue just over 6 billion Swiss francs. And they're still 100% owned by the Hilti family — well, technically it's owned by the Martin Hilti Family Trust, which reinvests all profits into the company. Luna: That's an unusual structure. No dividends, no outside shareholders. Lucas: It's a foundation. The trust owns the shares, and the trust's charter forbids selling or distributing profits. Every franc earned must go back into the business or into charitable projects. This means the family can't cash out. They have to keep making the company better generation after generation. It's almost like a self-imposed golden prison. Luna: And it's worked for four generations. Though I imagine there were moments when that structure felt suffocating. What about 2008? Construction collapsed worldwide. Lucas: Hilti's revenue dropped by 30% in 2009. The family council — which oversees the trust — made two decisions. First, no layoffs. They cut salaries across the board, including executives taking bigger cuts. Second, they increased investment in direct sales. The logic was: when the market rebounds, we want more feet on the street than anyone else. They spent 1.2 billion Swiss francs between 2010 and 2020 just expanding the sales force. Luna: That's a bet that requires a long horizon. Most public companies couldn't stomach that. Lucas: And that's the family advantage. The trust's horizon is indefinite. The fifth generation is in their twenties now — they're being groomed through a formal family council that meets quarterly, with outside advisors. The rule is: family members can work at Hilti only if they have a relevant degree and external work experience. No nepotism hires. Luna: It's interesting you mention that kind of long-term thinking. Because as we talk about family businesses that build to last — Hilti is a perfect example — it reminds me that these conversations don't happen in a vacuum. If you find value in shows like this, where we dig into real business mechanics without any ads or hype, listener support is what keeps it going. You can help out at buy me a coffee dot com slash fexingo. Just a simple way to say 'keep digging.' No pressure at all. Lucas: Yeah, that kind of support allows us to spend the extra hours tracking down these family trust structures and interviewing people who actually understand the governance. So, big picture: Hilti's model is now being studied by other industries. Caterpillar has a fleet service pilot. Some car companies are experimenting with subscription models. But Hilti has a 25-year head start. Luna: And they're not sitting still. They just launched Hilti ON!Track — a cloud-based tool tracking system with RFID tags. Every hammer drill talks to the cloud. Lucas: The tool itself becomes a data node. They can tell you which jobsite has an underutilized drill and which site is about to run out of battery packs. For a construction firm managing 500 tools across 20 sites, that's huge. And it's all part of the fleet contract — you don't pay extra for the software. Luna: So the fleet model creates a moat. Once you've tagged your tools, migrated your inventory to their platform, trained your team on their system, switching costs are enormous. Lucas: Exactly. And they don't gouge you on the switch. The first year's fleet fee is actually lower than the cost of buying tools outright. They bank on the long-term relationship. The average fleet customer stays 12 years. Luna: I wonder if the fifth generation will continue this trajectory. They seem to be pushing into software more aggressively. Lucas: There's tension. The older generation — cousins in their 50s and 60s — they're tool people. They grew up on jobsites. The next generation is more digital-native. But the family council has a rule: any major pivot requires a supermajority of 75% of voting family members. So it forces consensus. That's slow, but it also prevents whiplash. Luna: That balance between continuity and change — that's the hardest part of any family business. Hilti seems to have institutionalized it. Lucas: They have. The trust's bylaws even include a 'cooling-off' mechanism: if the family council can't agree on a strategy within six months, an independent board of trustees — outsiders — makes the call. It's never been triggered, but it's there. It's like a constitutional safety valve. Luna: I want to go back to the founding moment for a second. Martin Hilti started with wooden stencils. How did he end up in power tools? Lucas: Post-war reconstruction. Liechtenstein was poor, and Martin saw that building trades needed fastening and drilling tools. He started importing and then manufacturing his own. The breakthrough came in 1965 with the first Hilti powder-actuated fastening tool — basically a nail gun that uses a blank cartridge. It revolutionized concrete anchoring. That tool alone put them on the map. Luna: And the direct sales force came right after that, to demonstrate the tool on site. Lucas: Yes. By 1970, they had 1,500 engineers in the field. They called them 'Hilti men' — and they were known for wearing red jackets. Very visible. The contrast to competitors like Bosch or Makita is striking. Those companies sell through retail. Hilti is all relationship. Luna: Which brings us back to the fleet model. It's the ultimate relationship lock-in. Lucas: It's a beautiful business model, honestly. The customer gets reliability, Hilti gets recurring revenue and data. And the family gets to keep building without quarterly earnings pressure. I think that's the core lesson: the structure — the foundation ownership — enabled the model. Most companies couldn't have made that 2000 pivot because investors would have freaked out about the short-term revenue dip. Luna: So the question for other family businesses is: what unique structure can you create to give yourself the long leash? Lucas: Exactly. And Hilti's answer is that you don't have to be a foundation, but you need some mechanism that insulates you from short-termism. The Hilti family doesn't draw dividends. They live off salaries if they work in the business. The trust owns everything, so there's no temptation to sell out. It's a commitment device. Luna: And as of 2026, they're still independent. No IPO rumors. No strategic investors. Just the family and the trust. Lucas: Which is remarkable because Hilti is a crown jewel. Any banker would love to take them public. But the family trust charter makes it illegal. Literally — the trust deed says the shares cannot be sold. It's an ironclad lockbox. Luna: That level of commitment is rare. Most family businesses dilute or sell after three generations. Lucas: That's the statistic — only about 10% of family businesses survive to the third generation. Hilti is in its fourth, with a fifth ready. The trust is a big reason. But also the culture: the board of the trust includes three non-family members with veto power over major decisions. So it's not a rubber stamp. Luna: I'm curious about the current CEO. He's a non-family member, right? Lucas: Yes, since 2008. The family council decided that the CEO should be a professional manager, not a family member. The chairman of the board of directors is a family member — currently Martin Hilti's grandson. But the CEO is an outsider. That separation is healthy. It avoids the 'king's son' problem. Luna: And the family members who do work at Hilti have to go through the same hiring process as anyone else. Lucas: The same process, and they're evaluated the same way. There's a family employment policy written into the trust bylaws. No special treatment. If you can't cut it, you're out. And you only get one chance — if you leave Hilti, you can't come back. That keeps the family motivated. Luna: That's tough. But it probably explains why the family remains competent. Lucas: It does. And it also means that the family members who don't work at Hilti have other careers — doctors, lawyers, artists. They still have a voice at the family council, but they're not running the show. That reduces internal conflict. Luna: So the trust structure, the professional management, the fleet model, the R&D investment — it's all interconnected. You can't copy just one piece. Lucas: You can't. And that's what makes Hilti such a powerful case study. It's a system. The family governance, the business model, the capital allocation — they all reinforce each other. And it's taken 85 years to build. Luna: I think that's the takeaway for today. Not that every family business should become a foundation, but that the best long-term strategies are often the ones that seem constraining in the short term. Lucas: Constraints can be freeing. When you can't sell the company, you have to make it better. When you can't cut R&D to hit this quarter's numbers, you actually build better tools. Hilti proves that a well-designed constraint system can outcompete any short-term optimizer. Luna: And they've got the data to show it. Let's see if the next generation — the fifth — can keep the system intact. Lucas: That's the great experiment. The tools will be smarter, the software deeper, but the underlying discipline — that family trust, that long horizon — that's the real foundation.