Editor's Note: Carey Smith will be appearing at the 2020 Inc. 5000 Vision conference the week of October 19-23.
It's the entrepreneurial way to remain optimistic and find unique opportunities. That's according to Big Ass Fans founder Carey Smith, who spoke at Inc.'s Real Talk: Business Reboot streaming event on how to get your business through a downturn and remain positive in difficult times. "Don't be a victim," he advises.
Smith founded his company (which sells large fans) in 1999, and landed it on the Inc. 5000 list of fastest-growing companies 11 times, from 2007 to 2017. Smith grew Big Ass Fans into a multimillion-dollar enterprise through the heart of the 2008 downturn and ultimately sold it in 2017 for $500 million. Here's his advice for how to push your business through an economic crisis.
In the second quarter of 2008, when Smith says his team first saw indicators a recession was setting in, his first decision was that he would cut his own salary before firing any employees. Smith says reducing payroll is one of the easiest things in the world to do to cut costs, but it's difficult to hire people back, and the long-term success of your business depends on finding other ways to make up for lost revenue.
"Layoffs are the losers' way out," he says. "The fact that we kept everybody on and the fact that we all suffered equally I think set us up for the next 10 years."
During the recession, Smith and Big Ass Fans focused on cutting product development and bonuses. But they still managed to give everybody a $500 bonus in 2008. It's part of his overall ethos of offering financial incentives to help employees feel more invested in the company's mission. Likewise, employee incentives, such as money or free or discounted meals, can help business owners hire and motivate their teams during the pandemic.
"You're asking somebody for a big chunk of their lives, and I think you owe them more than a paycheck," he says.
Reexamine your strategy, and pivot where you can
Smith says the recession was both a challenging time and a boost to his business--but not right away. The long-term payoff came after Big Ass Fans decided to pivot to installing--not just manufacturing--fans during the crisis. It grew into a $30 million to $40 million business for the company. And, Smith says, his team learned more about the consumer from interacting with them directly, further informing the way they ran the business.
The company's iconic name even came from interactions with the customers. Smith says employees would answer the phone with the original name, "HVLS Fans"--the acronym stands for "high volume, low speed." Customers would pause and ask, "Are you those guys making those big ass fans?" Eventually, Smith says, someone on the team caught on and they renamed the company.
Smart entrepreneurs, Smith says, will keep moving, stop fretting about a return to a "normal" (there won't be one, he says), and look for opportunities popping up in such industries as health and sanitation.
Don't worry about competitors. Buy them
If Smith could go back and do something differently, he says, he would have bought some of his competitors. Other than that, he says, if you're concerned about competition, you're not doing something right. He recalls a hardware-business owner in Indianapolis who was sending employees to Lowe's and Ace Hardware to check prices and then reducing them in his store. Smith advised him instead to brainstorm ways to bring in customers by offering something innovative that shoppers couldn't find in other places, like a unique line of hammers, rather than just a lower-cost one.
Another place you can better direct your efforts is to greater transparency with employees about challenges you're facing.
"They're going to worry anyway," he says. Being honest, he adds, "sends the message that you're all in it together."