Rapid growth from 5 Business Acquisitions & eCommerce Growth during COVID
Innovation and differentiating are ways that ensure success in any industry and especially in an industry like homeware. These may include coming up with new designs and utilizing technology to the maximum.
In this episode of the Page One Podcast, Luke Peters speaks with Steven Greenspon, the founder and CEO of Honey-Can-Do international. A leading provider of home storage, organization, garment care, ethnic cuisine preparation, and other housewares.
Steven shares the strategies that his company utilizes in its operations that makes it different from other homeware companies out there. Listen in to learn the process of acquiring smaller companies and why Steven believes it might be harder than acquiring mid-sized companies.
How to set up an effective work-from-home strategy for your employees during the Coronavirus period.
The importance of investing in potential retailers and having effective communication.
Learn how you can manage your time effectively attending only to important things.
The advantage of having honest effective employees.
Understanding the acquisition process of new companies and what to look for before acquiring.
How you can innovate and differentiate in your industry to make your products unique even in a common industry.
[2:20] He explains what his company does which is primarily a home storage organization.
[3:38] How Honey-Can-Do International took early steps to deal with the COVID-19 to keep things running smoothly while still protecting the employees.
[7:12] He explains how their working from home strategy has worked out perfectly.
[10:19] He gives information about the size of the company’s workforce and its physical location.
[12:10] How they deal with consumers directly through eCommerce and with specific retailers.
[13:28] The growth in the eCommerce sector and investing in growing and potential retailers.
[15:09] He talks about the challenges of dealing with retailers.
[19:25] Steven explains how he effectively manages his personal and professional time.
[21:38] Why he loves his position as the CEO and the tasks he performs to ensure company growth.
[24:38] He describes the networking show held by the IHA organization that brings housewares companies together.
[27:55] He speaks about his time at the LDR industries and the cause of his eventual leave.
[31:07] The process of acquiring other businesses and how to differentiate them.
[36:35] He describes the emotional attachment of smaller companies that makes it difficult to acquire.
[38:34] How they’re innovating and differentiating in a common industry like homeware.
[42:03] He shares the mistakes that cost the company money by trusting incompetent employees.
Speaker 1: Welcome to the Page 1 Podcast, a podcast featuring a variety of guests and thought leaders on topics ranging from digital marketing, sales channel strategies, influencer marketing, best in class, product launches and all the details about how to accelerate sales. Now here’s your host Luke Peters.
Luke Peters: Thanks for joining us on the Page 1 Podcast. I’m your host Luke Peters of newer appliances and Retail Band Digital Strategy Agency. We’re now in a coronavirus world and I know that’s on everyone’s mind, so I’ll adapt all interviews to ensure that util listeners are getting the most out of this podcast. This episode is sponsored by Retail Band, and we can give you the owners a blueprint on how to grow your digital sales, either direct to consumer or via channels like HD, Wayfair, and Walmart. If you’re interested, find me on LinkedIn or email me at firstname.lastname@example.org. In this episode, you’re going to learn from entrepreneur, Steve Greenspon on how to differentiate without a well product and how he acquired five companies in the past five years.
Luke Peters: Steve is the founder and CEO of Honey-Can-Do International, is a leading provider of home storage organization, garment care, ethnic cuisine preparation, and other housewares under the Honey-Can-Do, Joyce Chen and Perch brands. He’s a member of the executive committee and incoming treasurer of the International Housewares Association. Steve holds an MBA from the Kellogg School of Management at Northwestern University and he’s recognized as an Ernst & Young Entrepreneur of the Year finalist in 2015. Steve, welcome to the Page 1 Podcast.
Steve Greenspon: It’s truly an honor to be here Luke, I’m a big fan of the podcast. I know that you normally only have successful people and smart people on here, so I really appreciate you making an exception. Thank you.
Luke Peters: Yeah. Well, I appreciate your humor, but audience checkout Steve’s LinkedIn profile you see he’s done quite a bit. We’re going to talk about all those things today and he’s got an amazing company and it has been moving quickly with all those acquisitions, but there’s so much more we’re going to talk about, but before we do, you guys sell a wide variety of products Steve, why don’t you quickly, briefly describe for the audience kind of what you guys do and sell, so they kind of better understand.
Steve Greenspon: Oh, perfect. Honey-Can-Do, as you mentioned it’s primarily a home storage organization. Everything from coat hangers, shelving units, shoe racks and garment racks, storage for just about every room in the house. We get into laundry care products, primarily ironing and drying racks and then different laundry care items. Through acquisition, we got into a wide range of baking stones and baking products. Then most recently we’ve gotten into, we acquired the Joyce Chen brand, which is a lot I think of cuisine prep things. Things like [inaudible 00:02:57], tortilla makers and a variety of items in that regard.
Luke Peters: Perfect. Okay. That helps. I guess before we get to some of these questions, why don’t we start with Corona virus and COVID-19, and we’re recording this in early June. It probably won’t launch until later July or early August, but I’m sure we’ll still be dealing with COVID then right now the world is starting to open up slowly, but why don’t you talk about how that’s impacted your company?
Steve Greenspon: Of course. From the start, we were very proactive. We created a committee early on and just thought of different scenarios and how we were going to deal with this. We started that really in late February. The health and the safety of our staff and ensuring that they know that the company, is just concerned about that and also as best we could just kind of ensuring the continuity of all of our warehouse operations, because that would then allow everybody to keep their jobs and maintain the stability of the company as a whole through out this. We moved our entire office team to a virtual, more than a week before the state of Illinois, where our headquarters is located, went into Shelter-In-place environment, and we had everything well-placed for that in advance.
Steve Greenspon: Our entire staff has laptops. We had a real strong internet connection at the office. A lot of cloud-based items, we had already started training in Microsoft Teams, and we were well prepared for that and really that went off without a hitch. We moved our warehouse team to all of the recommended guidelines and maintaining that they stayed open and really we ensure we were transparent in the communication that as long as we could keep from having an outbreak and getting people sick, we would be able to guarantee folks with jobs. We obviously, masks are a requirement, the social distancing, we put the different teams in different entrances and exits, separated them with washrooms, different washrooms, different break rooms, and just did our best. Then we also gave everybody strong reminders about staying safe when they’re outside of our environment. We gave our entire warehouse team a $2 per hour pay raise and the management team a raise as well.
Steve Greenspon: Just to let them know how much we appreciate them coming in, and also to ensure that we could maintain that staff and continue to get new people as our sales have grown over that time. When we’ve had positive tests, I think we’ve had about five positive tests. We haven’t had one for going on almost three weeks now, but we do the contact tracing where we’re probably overly safe in that regard and sending people home with [inaudible 00:05:46] just to ensure that everybody’s safe. One semi-permanent change that we made is that we’re going to go into a virtual office environment for the foreseeable future.
Luke Peters: Wow. How much office space did you have Steve?
Steve Greenspon: Our warehouse and office are in the same building. I’m going to say that our office is close to about 10,000 square feet. We’ve got roughly 60 people in the office and it’s been going very, very well. We’re able to maintain communication real well there, so we’re going to maintain an office always. For those that want to ironically, for those that want to have a quieter environment than their own home that want to go to the office, they can or we’ll have meeting space for teams that want to get together to have meetings, but we’re giving folks the options and each team is probably going to be a little bit different, but just to work from home whenever they want to and have that flexibility.
Luke Peters: Wow.
Steve Greenspon: With that regard.
Luke Peters: Steve, so this is so interesting, because we’re talking about our back to work plan and we haven’t really finalized it because I figured there’s no rush. We’re like you it’s operating good remotely and just like you also, we have the office in the warehouse, the main warehouse with the office attached to it. What do you think is going to happen? Just quick prediction, do you think 20% of the people are going to end up working in the office? Do you think you’re going to have like one day a week management shows up or two days a week so that you guys can have some meetings, or just curious your quick thoughts on how you think it’s going to play out?
Steve Greenspon: Yes. Typically our leadership team has always met once a week, in a formal setting casual, far more often. We changed that to twice a week. We’re going to continue that one meeting is scheduled for 20 minutes, the other one is for an hour. We’ll maintain that and just give people the option to either be there in person or to do it through Teams. I would say and the feedback that we’ve gotten, our folks are probably going to be working primarily from home and then just if they need to do something specific at the office. For customer reviews we’ve doing those at the office, so we set up a nice showroom with lighting and add a little bit technology for that. The customer reviews have been very good remotely and we’ve been able to have a lot more products there, we’ve been a lot more better rested for the meetings, as opposed to doing all the travel and everything. We’ve been able to have a lot more people from our end involved in the meetings because the remote… Including product development, or maybe somebody from logistics, if they can add something. In that regard, it’s been going real well. To answer the question, maybe, I don’t know, I’m going to guess 20% on any given day, maybe even less probably.
Luke Peters: Yeah. Let’s talk quickly about those customer reviews. This would be, are these going to be only for bricks and mortar or are these even for new product launches that are going to your dot-com retailers and marketplaces?
Steve Greenspon: It’s been primarily for brick and mortar that we’ve been doing this. There is a regularly scheduled reviews the retailers are having that are always in person and then the COVID environment is forcing this to be virtual and obviously they need to continue to have the reviews. It’s been fantastic in every way. Obviously you want to have the relationship and have the shaking of the hands and the looking at the different facial expressions and being there and there’s nothing that can replicate that virtually. However, we’ve just found that we’ve been able to prop the items and been able to present a lot more items. We found the communication has gone very, very well in these virtual meetings. Although we certainly can use them for presenting new products for free commerce retailers as well.
Luke Peters: Yeah. That’s a huge advantage to have that set up. wow. That’s good feedback on how you guys have kind of navigated COVID and I think it’s interesting. You set up a committee. I know you’re really organized guy and good feedback there from the very beginning, set up a committee and get more people thinking and planning, so it’s not all on your shoulders, but you guys were really thorough and super complete explanation there. Kind of moving on to your business, just to give some context to everybody listening, you talked about your HQ and 60 folks inside the office. Can you share total employees, total warehouse size and just maybe any details about the departments that you think might be useful to listeners?
Steve Greenspon: Yeah, of course. We’re based in suburban Chicago, it’s a 500,000 square foot facility. There we do our warehouse fulfillment. We also have a lot of customers that buy from us on a direct import basis. [inaudible 00:10:36]ship to consumer. We’ve got about 120 folks in full time positions in the warehouse. Then we also have a staff in China, Taiwan and Vietnam. Probably about 30 people in Asia and that includes merchandisers and quality control and factory audits staff. We have folks that work directly with our retail customers that have offices in Asia directly and just kind of expediting orders and doing all this sorts of things. We have engineers there working on product quality as well and design.
Luke Peters: Wow. If I’m putting this together, so it’s 120 warehouse, is that also an additional 60 in the office or is it 120 total in the whole building?
Steve Greenspon: 120 plus 60.
Luke Peters: Wow.
Steve Greenspon: Plus 30.
Luke Peters: Yeah, so over 200. That’s in a massive facility. How close to downtown are you guys?
Steve Greenspon: As the crow flies, as the saying goes, I want to say that we’re probably about 15 miles straight West of downtown. You can see the Chicago skyline from the front of our facility and then certainly from the roof.
Luke Peters: Awesome. Okay, cool.
Steve Greenspon: We’re not too far from O’Hare Airport.
Luke Peters: Oh, got it. Yeah. I’m there every year for the show except this past year, which is unfortunate, but it’s good to know you’re that close? What about, sales mix? How much are you able to talk about percentages of in-store versus online and then specifically how much of that direct to consumer on a website, if any at all?
Steve Greenspon: Yeah, of course. A very small percentage is direct, is sold direct to consumer from our website. It’s not an area that we focused on in the past. We certainly have all the items set up for those consumers that want the direct relationship. We also use that as kind of a tool to communicate to consumers on a number of areas, product specifications, features and benefits and things like that. It’s not an area that we choose to sell a lot of through right now. In terms of mix, so pre-COVID, we were probably maybe a little bit over 50% through e-commerce versus brick and mortar retailers and that includes Omni channel. We’ll break it down if there’s an omnichannel retailer, that’d be between what we do on their website versus what we do through the stores. Of course this year with a COVID environment so many brick and mortar retailers being shut down, the last few months it’s probably been about 75% e-commerce.
Luke Peters: Yeah. That’s awesome. Congrats for being able to pivot, and what’s been your best growth channel online, I’m assuming Amazon’s probably a cranking right now, but anything, anybody else stand out or any other channel stand out?
Steve Greenspon: Yeah, so e-commerce essentially anything with a dot-com at the entrance has been performing really well. With the exception being, not surprisingly those retailers that are selling B2B primarily and we’ll say the major office retailers and maybe the leading MRO retailers as well, or I shouldn’t say MRO retailers, but leading MRO suppliers have been a little bit slower than most. We’re investing kind of where we’re seeing the growth and this is something that we’ve kind of espoused and within the company is, invest in those retailers that are growing, invest in those retailers that we think will be around in five years and those that want to partner with us because the returns will be much stronger. It’s easier opportunities to partner with retailers that might be having their own challenges for a variety of reasons, but it costs you resources and there’s certainly an opportunity costs to deal with, so you’re not going to see a longterm return on them. We’re really putting resources behind those retailers that are growing.
Luke Peters: Yeah. Why don’t we dive into that a little bit, I guess we don’t have to mention names. We know who the big retailers are and I’m sure it’s, I’ll speak for you, but it’ll be like an Amazon or a Wayfair or Target or… There’s going to be a lot of these dot-coms.
Steve Greenspon: Absolutely.
Luke Peters: Yeah. What specifically, I know it sounds like an obvious question, but I think maybe there’s some nuances or fun bits of information. What specifically does investing in a retailer look like for you guys?
Steve Greenspon: It’s so many ways that we didn’t even realize until we broke it down. It’s certainly at the time of the salesperson and pursuing the account. If you’re designing products for them, then all the resources involved in that. There’s hard costs involved with it, just setting up the EDI connection and then with the EDI funds that are involved there. If the retailer doesn’t pay their bills on time, then we’ve got a credit department and an [inaudible 00:15:40]R department that has to spend time with them and if they’re taking deductions that may not always be justified, then there’s time involved in that. It’s just creating these efficiencies.
Luke Peters: Them taking deductions that aren’t authorized, that never happens in this business. Why would you need to worry about that?
Steve Greenspon: Exactly. You know what, I don’t know if brands, they’ll let it go or if retailers feel like pulling a smart one, or if maybe they don’t realize that it’s happening, but it’s a cost and it needs to be figured into the overall relationship when it happens. I want to think the best of people and companies, and that they’re not doing it on purpose, but it’s something that has to get figured into the cost.
Luke Peters: Yeah.
Steve Greenspon: If it happens consistently, obviously you want to communicate it and let them know that it’s a frustration if it’s not justified. Then certainly there’s no company that’s perfect that I’m aware of, where they’re not going to have compliance charges. We’ve also seen instances where it’s just abusive in that case.
Luke Peters: Yeah. We’ve seen the same and it’s, but you’re right though. Communication is really key and I think once that happens and then whatever the issue is, is identified, it usually can stop it, not everything though. Sometimes there’s just crazy post audits that come in without any backup, but yeah, it definitely pays and I’ve learned the hard way, and I’ve taking too long to learn this, but it definitely pays to have a great accounting team, strong control systems because we have to. They’re doing their job and we have to do our job and while we’re building the partnership, everybody’s got to be pretty transparent about those challenges along the way, too.
Steve Greenspon: Absolutely. Something that we started doing and it’s the most obvious thing in the world that we weren’t doing, and I don’t know how many companies do it, is we’re doing customer profitability by[inaudible 00:19:05]. You start with the sell price and then you go your cards by [inaudible 00:19:05] then figure in what the agreed upon allowances are and if there’s freight involved, and EDI involved, and if there’s compliance charges involved, justified or not. You break it down as detailed as you can and you might find that you’ve got a customer that you think holistically is very profitable, but you’ve got skews in there that you’re better off not selling to them or tweaking the pricing or you might find that you’ve got accounts that you thought were really profitable that maybe they aren’t.
Luke Peters: It’s so key.
Steve Greenspon: We’ve learned a ton of information through the breakdowns.
Luke Peters: Yeah. There’s a great book. It’s called Islands of Profit in a Sea of Red Ink. It’s interesting because in the book and it’s done by these really high level auditors of fortune 100 companies, and sometimes what you just said is really difficult to do with most CRPS. Even with large companies and in the book, their methodology is that you literally have to… People have to go to individual transactions and just work out all of the details you just said because oftentimes systems can’t spit that out, so they got to literally do it kind of manually, but they can just do it for a small sample size and then you can… Portion of that out. Yeah, that’s super important. Let’s move on to one of my favorite subjects, time management, and I can just tell the audience, this is definitely a strength of yours. Just so the audience knows, Steve, so I looked at this in your LinkedIn profile, you’re on three boards, you’re running a large company and then funny enough, you responded to emails to me like at all hours of the day and night. Would you mind sharing your best one or two time management secrets?
Steve Greenspon: Yeah, so as much as I can and I don’t know any secrets, but is that I try to keep things as simple as possible and not to clutter things and that’s both physically and in terms of time or intellectually and also kind of the mindset of it is just that. I’ve got my closet organized in such a way that I can easily find whatever I need and I don’t complicate things and if something doesn’t fit or is worn, I just get rid of it. They donate to charity right away, so it’s not cluttering things. I keep my desk is as uncluttered as possible. I try to keep my inbox as uncluttered as possible. I might have some undiagnosed condition[inaudible 00:20:15] clutter out there. I try not to buy anything unless I feel like I really need it because otherwise I go nuts with having things that are considered clutter. Keeping things simple and just getting in patterns and having consistency and just as you mentioned with the warehouse, just avoiding extra steps and extra things to do.
Steve Greenspon: If I somehow get on an email list, I’ll immediately unsubscribe if it’s not something that I want rather than having to delete it each time and the seconds involved in that… I try to organize my morning routine, go here, do this. Go there, do that, leave the house, grab this. Even something like if I leave my keys in different places, that’s time that I consider to be a waste, so I always make sure that I know exactly where everything is.
Luke Peters: Yeah. That’s just overall, it seemed really organized and just thoughtful about planning, so that seems to be how I would summarize that response, but I mean, still, you’re running a large company. By the way, I want to move on to some other questions, but quickly, what do you see, obviously, CEO and founder of a large company, and you guys have made all of these acquisitions and we’ll briefly talk about those, but what is your main role and where are you mostly spending your time?
Steve Greenspon: It’s evolved over the years and it’s still evolving. Today, I am so thrilled with my spot in the company and just being a founder and on day one, we literally had three staff members, including myself. I’ve been involved and I’ve had the chance to be involved with every aspect of the company. Everything from doing certain accounting functions and marketing, and certainly business development and product development and sourcing and I’ve learned and grown from those experiences. Today we have such a phenomenal team, especially our leadership team, but including, I would say everybody and we’ve been very, very curated if I can use that term for hiring and maintaining and training the staff that I’m able to be more strategic than I’ve ever been in my life and just kind of looking at future plans and the budget and forecasting and growing and doing things that are really adding great longterm value and I really enjoy that. If need be, I can still step in and provide some tactful guidance if I can call it that wherever necessary, but I’m at a point where I really love and I’ll use that term love our team and I’m so excited by the people that are there.
Luke Peters: How long did it take you from founding to how many employees… Right now you’re a little bit over 200. How many years and how many employees were you at where you really were able to step away? Kind of made that transition where, not step away, but where you were… I mean, I’m sure it’s a transition like every year is a little bit better, but where you literally, I could just work on the business and the strategy. Is that more recent?
Steve Greenspon: Yeah. Very recent. I started the company in January of 2008, so this has been very, very recent and in many ways it’s my own evolution, but in many ways it’s also just having the right people that would allow me to do that and also where I could be in a position where I could trust and feel that way about the staff. Where I could, I guess, emotionally step away and I felt good about that, but probably if you ask about leadership, I get involved in too many things still, but I’m much better at it than I was in the past.
Luke Peters: Don’t worry. I get blamed for that too, so we’re probably very alike in that, but how can you not when you love a company and you started it and you’ve been there for everything, so it’s kind of in the DNA.
Steve Greenspon: It’s the founder’s syndrome. Yep.
Luke Peters: Exactly. So, listen, before moving on, wanted to give IHA the International Housewares Association, quick shout out here. Obviously you’re an active board member. It’s a great organization. Anything else to kind of share in case folks are listening and they don’t know about IHA, maybe they go to hardware, but they’re not going to IHA. What else could you say?
Steve Greenspon: Yeah, our website is housewares.org. It’s a not for profit and it’s the association for brands of housewares companies. They put on the annual show in Chicago in March, [inaudible 00:24:52]a great opportunity for brands to get in front of retailers and these are all the major retailers and housewares as well as [inaudible 00:25:02] e-commerce, every retailer that’s in housewares attends that show and they look forward to that show.
Steve Greenspon: It’s also a great place to meet influencers and the press as well, also have a great presence there. The association also has great networking opportunities through an annual meeting called CHESS in October in Chicago. We’ll see if it happens this year, where they have great speakers and most importantly, it’s great networking with other housewares companies. We all have similar challenges, similar opportunities, and just to be able to talk with other people and meet other people and build those relationships for [inaudible 00:25:43] priceless. There are CORE groups which are regular scheduled meetings of housewares companies where you just get together and talk about important issues of the day.
Steve Greenspon: I always learned a ton from all those meetings. Obviously there are bigger companies on the meetings are really innovative and talk about things that are happening with them, but then some of the smaller guys, many of the smaller companies are so scrappy and they’re so involved in the day to day and in then we’ve done things, I learned a ton from them as well, so it’s just great. Then plus everybody in the industry is, if you’re selling housewares products, chances are you are a pretty nice down to earth person.
Luke Peters: Yeah.
Steve Greenspon: I really enjoy the industry.
Luke Peters: It’s a great show, if you’re not attending, you need to attend and for those that are attending housewares, and a lot of folks may not know about CORE and you definitely got to look into that. I never knew about CORE, but I’ve attended housewares shows for probably 15 years or something like that. Just until a couple of years ago, I had no idea CORE even existed and it’s like a typical mastermind group if you’re in EO or Vistage or something like that. It’s obviously housewares companies and there’s a mediator and it’s really a great value offer that housewares puts together. I definitely recommend everybody look up CORE and the additional events that Steve mentioned there, we’ll have it in the show notes.
Steve Greenspon: Yeah. I’ll say this, that being a member of housewares is the best value that you could make for your company. CORE and CHESS and every… CORE there’s no charge for members and I think the membership, well, depending on the size of your company is a few hundred bucks a year, so just tremendous value.
Luke Peters: Cool. All right. Let’s move along here. Again, just looking at your past experience, in 2007 you exited LDR Industries, so you’re an owner there and you helped grow this significantly to an EBITDA to eight digits. I just wanted to ask what you learned from that exit? Obviously business owners listening to this podcast are always kind of contemplating an exit. Great to learn from your experience here and maybe what you might’ve changed.
Steve Greenspon: Yeah. I can probably pass along some good lessons and whatnot too. I was a one third owner of the company. I don’t have… I got there my two partners were living full time in other states, the company had been basically break even marginally loss for years before I got there. I was the operator, the full time operator, but made some kind of common sense decision to set up some processes. We did some great things, get ready for the exit and I learned right about the time of the exit that my partners, without my knowledge were, I guess I should use term allegedly, doing some unethical, immoral things that I was not aware of. The result of the due diligence from the perspective sale to the PE firm, the deal got nicked. I came to them shortly thereafter and said, we got to end this partnership, it was a number significantly less than what the PE firms offered us and said that could I be a buyer at this number.
Steve Greenspon: I could be a seller at this number, but we just need to end this thing and they ended up buying me out. I wouldn’t have been happy. I didn’t want to be a part of a company with… I was leaving regardless. I was just able to get a little bit of money out of that and used that to startup Honey-Can-Do.
Luke Peters: Wow. That’s amazing story there, but how did you turn it around? Was there… Could you put that, I know you mentioned processes and commonsense and things, but anything specific it’s always great to hear. A specific story that yielded a lot of profit?
Steve Greenspon: Yeah. One of the challenges there was, I don’t know… I’ll say, so there was a company in plumbing and bath, selling to home centers primarily and the hardware channel and there… Just things like updating the packaging, they hadn’t been updated for decades to give it a fresh new look. Getting answers to customers and to the sales staff, as simple as that sounds, we had been losing so many opportunities because we just couldn’t get answers in a timely manner because my partners were more or less working part time, but of course they still wanted the power to have everything go through them. They’re bringing in new products, heaven forbid. Getting rid of bad products, heaven forbid. It was very much a kind of back to basics approach. Not anything exciting or innovative, but is very much a basic and by the way within a few years of my leaving, the company went bankrupt.
Luke Peters: Wow, wow. What a story. Then you use that capital to start Honey-Can-Do in 2008, is that right?
Steve Greenspon: Yeah, yeah.
Luke Peters: Great. Then along the way, there’s so much to talk about, but along the way just because we wanted to feature this portion of it. You purchased several companies, you guys acquired or rolled up several companies. Why don’t you kind of give us what you learned from that experience. What can people avoid in the future maybe, and what may have worked really well for you and then also how you identified those companies?
Steve Greenspon: The identification has been almost exclusively word of mouth, but there are some great brokers that work very closely with the housewares industry and others that are outside the industry. An interesting fact is that roughly 85% of the housewares industry, which is essentially the people that attend the housewares show or exhibit at the housewares show are less than $10 million in revenue and all of that, a very large percentage are under $5 million. These are companies generally speaking, they’re not large enough to really scale and get bigger, they’re not large enough to get the attention of private equity investors and for the most part there aren’t a lot of strategic acquirers within the industry, especially for companies that are in that size range. Often these companies don’t, they really have a succession plan, so there’s a lot of opportunities.
Steve Greenspon: Our primary interest is, we’re looking for great products that we can expand into and then we’re looking for kind of that existing customer base that we can then roll up and that’s the value of the acquisition. We can more or less often bring them into our platform and our expense structure. We’ll still have the variable expenses[inaudible 00:32:32] absorb their other fixed costs into our structure there and then just work on growing these companies, maybe they weren’t very successful with e-commerce before that and we can use that as an opportunity to grow.
Steve Greenspon: Maybe they weren’t successful in marketing or other areas[inaudible 00:32:51]and invest in those areas, brands. We’ll work with the existing ownership and find out what their goals are and kind of customize the deal around that. If they feel that there’s maybe missed opportunities that they just couldn’t get to because of lack of capital, then we can work with them on a tail and we can get payments them as the other product scroll for a period of time or if they’re looking for basically a lump sum in closing and then a gloss in the sunset, then we’re certainly amenable to those options as well.
Luke Peters: Wow. Are you financing that yourself through an ABL or are you using SBA or is it just kind of vary on each deal?
Steve Greenspon: Yeah, it varies by the deal, but the deals that we’ve done so far have been through our existing involvement with the bank. Although, for larger deals we’ve gone down path of both alternative options for financing that we haven’t done or needed them in the past deals.
Luke Peters: Yeah. That’s super interesting and good on you, that means you running incredible business just to be able to roll those up using your current ABL and financing that you have. What is, do the owners usually stay on? Do they not stay on? Of course I’m sure that one varies by company as well.
Steve Greenspon: Yeah. In the past we have not had any ownership stay on and that’s been primarily by their own choice. In every deal we’ve had agreements with them for a short term consulting fee because there’s always things that come up post-closing in a variety of ways about customers, about the vendors, about the products and things and we just want them kind of on call for a period of time to answer questions, but it’s never been a permanent thing.
Luke Peters: In the future, are you going to continue to do this? Is this something that you’re going to continue with or are you guys going to kind of take a pause on it?
Steve Greenspon: No, we see this as a great a growth opportunity for the future. We learn something new on the process, every single acquisition that we’ve done and we’ve seen it’s just a great opportunity for the future in terms of growth.
Luke Peters: Great. Last question on this, do you have an internal team that this is their job, or is it just kind of when a deal happens, some folks will come from ops and maybe finance and they’ll get together and run the deal, or is it kind of more specialized since you’re doing quite a few of them, it looks like?
Steve Greenspon: No. It’s been with our existing teams and then each team kind of plays a part in it. Certainly our CFO and our finance team is very active with this, just in putting together the models and what it looks like. Our product development team and then our product management team spend a lot of time getting all the data into the system and often with the companies of the size, they don’t have all the data on the product and the customers and the Chinese vendors or Asian vendors that we normally have, so there’s a lot of filling in the blanks in that regard. Packaging changes and marketing and every team is involved in the process.
Luke Peters: Wow. Well, thanks for all those details. I think it’s a definitely valuable nugget there for folks that are, even if you’re not in the housewares space, if you attend the hardware show and that’s your category, just back to the original statistic that Steve brought up 85% of these companies are under $10 million and then a significant portion of those even under $5 million, so there’s a lot of companies out there. A lot of them probably with a lot of potential, but they’re just not big enough to be of interest to PE groups and maybe even other groups. I guess it presents a nice opportunity and you guys are taking advantage of it and thanks for sharing a little bit about that.
Steve Greenspon: Yeah. Something I’ll say is that, I believe this, but I’ll say it in half [inaudible 00:36:43] is that it’s more difficult to make an acquisition of a $5 million company than a $50 million company. That’s because you’ve got somebody who feels very emotional about their company and this is their livelihood and they want to make the best deal and are they doing the right thing? They don’t have the data sets for the transition and they don’t have, I guess, that knowledge of what the best deal is that they can do in that regard. We’ll often look back and say was the deal worth the benefits. I have no regrets on any of the deals that we’ve done, but it’s a lot of work to get to closing.
Luke Peters: Yeah. I can imagine. That’s a nice nuance that you brought up, that emotional side and definitely heard that all of the auditing and the fact checking is going to be the same, doesn’t depend whether it’s a larger or smaller company, but then that added nuance of the emotional side of it I’m sure can be a tough one.
Steve Greenspon: Absolutely.
Luke Peters: Just kind of finishing up, one topic I wanted to jump into is, you’ve had a lot of success on differentiating products that don’t have that wow factor. At the beginning, you talked about a lot of the different categories you’re in, from hangers to some small kitchen appliances and I think it was ironing boards and products like that. Are you able to share kind of a strategy with the audience or an example of how you’re able to create that differentiation? Because I know marketing teams can always push back and say, Hey, why are we bringing this in if it’s the same as what’s out there and maybe companies can put a small wrinkle, but at some point, there’s just sometimes can’t be a lot of innovation on certain products, but it seems like you guys have still been really successful. It’d be great to kind of hear how.
Steve Greenspon: Yeah, it’s funny because you want [inaudible 00:38:39]when you have a picture of an entrepreneur, it’s somebody with this phenomenal new product or service that they invented in their garage, that’s going to change the world and that’s not the majority of ways that this happens and so many industries are in what most people would consider to be kind of boring areas, but we’ve always tried to innovate and differentiate in other ways. Today we’ve got a number of wow products and I am incredibly excited about some of the newest things that they were coming out with this year and next year. We’ve got a great team coming up with some phenomenal new products, but we’ve also hit a lot of success as you alluded to kind of in everyday functional items that have been around for decades and decades.
Steve Greenspon: [inaudible 00:39:25] we’ve kind of differentiated through one is e-commerce when we first started within our categories, there weren’t companies that were drop shipping and we found that to be a phenomenal niche and by being able to drop ship a lot of these basic products that nobody else would do, we were able to grow and [inaudible 00:39:46]customers and get products to consumers that otherwise that void wouldn’t have been filled. That was a great area. Our retail packaging, we’ve always felt it’s been a great differentiator and also just kind of being broad and deep within our category. From day one that’s been the goal that we could go into a retailer and kind of support their brick and mortar[inaudible 00:40:11]
Steve Greenspon: Whether it’s four feet, eight feet, 12 feet, whatever, and have all the different materials and all the different manufacturing process used to fill that entire set. As an example, we’ve got hangers made of plastic tubular, of wood, of flocking material of the metal and garment racks which are Chrome plated steel and just having that wide range of different materials and going deep within the subcategories has been a big differentiator.
Luke Peters: Yeah. A lot of it sounds like you guys are really just good on execution. I mean, obviously you’re bringing quality products, but you’re thinking about strategy. You’re thinking about execution, you’re making it easy for the buyers and for them to make their decision and like that example of going deep or being very flexible on the drop shipping and fulfillment. Probably a similar link to you at LDR where you came in and you executed. I think that’s how I’m seeing the answer on my end is, obviously you bring in great products and you guys have 30 folks over in Asia, engineers and designers and so on and so forth, but the end of the day, it sounds like you’ve got a great brand promise and strategy execution.
Steve Greenspon: We’ve made a lot of mistakes to get there. It cost a lot of money to get there. [inaudible 00:41:36]dumb mistakes, needless mistakes and avoidable mistakes and all you can do is learn from them and try not to repeat them and be better in the future. I don’t want to give the impression that we’re the perfect company and that we don’t make mistakes. I’ll be darned if we’re going to make a big mistake twice.
Luke Peters: Well, good on you for making sure that happens and really, really quick as we wrap this up, what has been your biggest mistake? Any single thing that has kind of stood out that folks can learn from?
Steve Greenspon: Yeah. I want to phrase this in the right way, because a lot of it ties in with my own, I guess insecurity with my own decisions and just trying to take advice. You go to seminars and you hear smart people say, All right a good CEO will listen to their people and get out of their way and let them make the decision. A major part of that, if not all of that depends on you having the right people in place and if you hire outside consultants will say, why are you going to hire a consultant if you don’t take their advice, so you should take their advice and I’ve been guilty of…I’m putting the blame on me of finding mistakes, but making decisions by hiring the wrong people in the past and then taking advice and that’s consultants and staff members, including people in key positions.
Steve Greenspon: I want to stress that today, we’ve done much better in that regard and we’ve got phenomenal people and I’ll take their advice over my own all day, all night. I’ve just made some bad mistakes that have cost us a lot of money over the years and one is making sure that you have the right people and unfortunately it’s taken me too long to realize that we didn’t have the person in the right role. It’s taken me too long to act on it in the past. I’ll leave it at that and I’ve got a list of mistakes that I’ve made not as a result, they’re my mistakes, but just by not having the right information or the right guidelines to pursue.
Luke Peters: Yeah. In basketball, the common comment is there’s no substitute for height and I guess in companies, there’s no substitute for talent, so that’s kind of which you’re describing there.
Steve Greenspon: Absolutely. Yeah, and a lot of that goes with, as you get bigger you can better afford good people and are more excited to be with a growing company that’s performing well, so it’s a chicken and the egg type of thing, but it’s hard to reach that size and that success without good people.
Luke Peters: Yeah. It is absolutely chicken and the egg, so those smaller companies it’s like all about just getting that initial scale that they can do it. Companies can do it when you’re still smaller, you don’t have to have 200 employees, but you just got to be moving that direction. It’s a great lesson and a great way to kind of wrap up this interview. Steve, before we finish up here, how can listeners find more about you and learn about you maybe on LinkedIn or is there another way?
Steve Greenspon: Yeah. LinkedIn, Steve Greenspon with Honey-Can-Do International. I’m pretty accessible. Sometimes [inaudible 00:44:48] contacts from just about every sales person with every service that I don’t want or don’t even understand what it is.
Luke Peters: That’s funny. I’m guilty of that too. Well, cool. Listen, I want to thank you again, Steve, for being on this episode of the Page 1 Podcast and also thank the listeners for listening to this episode of the Page 1 Podcast, we truly appreciate your reviews on iTunes and hope you guys join us for the next interview. Take care.
Speaker 1: Thanks for listening to the Page 1 Podcast with Luke Peters. If you enjoyed this episode, please help us out by leaving us a rating on iTunes. Want to double your online sales, check out www.retailband.com. And don’t forget to join us next week with our next amazing guest.