How do you mint 15 new millionaires over night? Carey Smith of Big Ass Fans knows how. He committed to growing his industrial fan company for as long as it took, until he was certain that his most hardworking employees could also become rich from the sale of his company. That meant waiting until he could sell it for $500 million, giving away 10% of that to his team.
Carey doesn’t like to call himself an entrepreneur. He’s been creating businesses since he was a teenager, and it’s simply part of who he is – it was never going to be any other way. Still, when you listen to his story you start to understand how his background shaped his thinking, and how someone with no experience managing a team was able to successfully lead a company of over 1,000 employees.
In this episode we discuss how he came up with his business idea, uncovering a massive opportunity that would lead to owning more than 75% of the entire market he worked in. We also dig into the day to day of his work as CEO, and his relentless attention to detail when it came to his tribe of employees and his customers.
Carey has done many interviews over the years, including a feature on PBS, but the stories you’ll hear on this show will not be found anywhere else.
1:09 What do you think contributed most to your success, and what makes a successful entrepreneur?
1:23 What i used to tell my people is that we had to make money to be in business but we’re not in business to make money
4:40 Why you should speak to people in the field after they make a purchase
4:50 We’re not interested in hearing the nice things, we want to know what we did wrong – takes digging
5:50 Sold directly to customer and this was important because they talked directly to the customers, which affected the product development
6:25 Sergei: 2 things to stood out to me from your advice – don’t just chase money, and provide value to the customer
7:37 Most people wouldn’t start a fan company, and going back to your first business, if not for the money then why did you start it?
7:37 Main reason Carey started a business was that he thought he could do it better than people he was working for. Needed more freedom
8:24 Story about what Carey did in highschool to teach kids for 3 days and takeover the school
9:30 Asked students what they were interested in and asked what their parents did, and made enough offerings to teach 1000 kids over 21 classes
10:30 That was his first experience in realizing that he can take his own idea and make it a reality
10:45 Started his first business at 28 – good to do it while you’re young because you have a lot of energy and your lack of experience helps you take more risks
11:20 When they were kids they moved 12 times, so they were very independent
11:50 What was the fist business opportunity you recognized?
12:48 Learned how to convince people it was a good idea even though it wasn’t the best one
14:40 Even the business that he got to $1.5mm in revenue, it wasn’t enough to even hire people. He had to do all the sales, marketing, installation etc.
15:13 Even at this point he was paying attention to other opportunities because it was obvious that this wasn’t going to grow
15:57 Don’t need to start a business around a product you like. it’s business, it can be about anything
16:00 When looking for an idea, Should look for something that is out of the ordinary. For example, their fans weren’t ordinary size fans. At least that stands out
16:40 He found out that large industrial buildings weren’t air conditioned and were very uncomfortable to work in. Big fans would make them more comfortable and productive.
17:53 As a business person you want a monopoly so you can control the market, by having first entry
18:50 Vadim: A unique value proposition is definitely important
19:30 Threading a story here – grew up independent – realized in HS he can do things himself if he wants to, and later on did the business he knew the most about, and evolved from there.
19:55 Where did the idea for big fans come from?
20:20 Did a lot of writing for trade magazines to get in front of his customers
20:51 In one of them Carey saw an advertisement from a small machine shop with a huge fan
21:19 Lesson – you should always leap on every opportunity. Don’t think you’ll get it again.
22:00 Had to have exclusivity because he knew it was a good idea
22:53 Also included in the contract that if they sold a certain amount of fans, they could buy the Intellectual Property for $400,000.
24:00 Ended up buying the IP after they messed up by using a cheaper gearbox forcing them to send back 600 fans
24:42 The name of your company should explain what it is that you’re doing
25:00 How did you fulfill the orders right away when you started manufacturing yourself
25:20 Purchased 1,000 fans from the original manufacturer to buy them time. Put themselves into business within 6 months
26:10 These guys see you selling thousands of fans when you executed your IP purchase agreement. Did they try to prevent the sale?
26:30 Originally they offered to buy the company for $5 Million, but they weren’t really interested.
26:56 They went on to hire all his employees and stole his database, so they ended up suing them. And after several years they won.
27:40 They got an injunction on them right away so they couldn’t use any of the information that they stole
27:47 They lost them as a distributor, lost their customers and were forced to lawyer up
28:18 The supplier’s company only ever got to $15-20 million, while they did $250 million+
29:19 When you think about starting businesses, what’s the first thing that you do when you start it?
29:47 When he wanted to start his business, he told his wife he could no longer work at the company he was at, and he needed to sell his house. Started with $30,000.
30:34 To sell the roof cooling business, they had to explain the product and how the science works to be able to explain it.
31:24 He spent a lot of time writing because they didn’t have money to spend on advertising and this was his customer acquisition strategy
31:37 They also used direct mail
31:41 Before they did the writing they already developed a product on the weekends
33:17 Even with online advertising, you need to use the tools in a different way than someone else. You have to attract attention
33:37 Even in trade shows, people just walk by so you have to catch their eyes
34:45 The name had to have helped you scale this business
35:00 That’s definitely a big part of it
35:50 The name was a representation of their brand and their culture.
36:05 A lot of the way he approaches business was the way he was taught to do things in kinder garden. Watch out for everyone, be nice and do your best.
36:50 He would always be out of his office talking to his employees, even when they had 1000 of them.
37:17 That way you get to know the problems in the company, and everyone in the company knows who you are. And often it’s a communication problem which is critical to solve.
37:40 They were focused on the customer but the employees as well, because if you don’t treat them well they won’t treat the customer well
38:00 They paid bonuses, even people in production got much bigger bonuses than people in the C-Suite
38:22 When Carey executed the sale of the company he wrote checks for $50 Million. 15 people were made millionaires.
39:20 Part of the reason they sold for $500 Million was because he felt that the value was enough to get a good amount of money for his employees
40:15 There’s a lot of takeaways here. You listened to a lot of the things you learned as a kid
40:25 Another big takeaway is don’t get hung up on the perfect idea. Find something you have some insight into or like or are good at and just start solving problems for people. It will lead to something else.
41:14 You would have never had the insight of the big fans if you didn’t run the cooling businesses
41:28 You also knew to take the time and talk to your employees and customers so you knew how to solve their problems
42:32 If money is your focus you won’t get it
43:44 Do it, do it right, keep doing it.
44:00 How long did you work on the original business for that didn’t work out?
44:25 For 12 years
44:27 I ask because it’s important to see that sometimes the good business idea doesn’t come over night. You have to “do it and keep doing it” until you figure it out. That’s a big message for us in this episode.
45:20 A lot of people dream and talk about things but they never start.
47:26 When you’re older you’ll want to look back and say, I did the things I wanted to do.