For Big Ass Fans CEO, going against grain comes naturally

Carey Smith leaned on one of his products at the groundbreaking for a 72,000-square-foot expansion of Big Ass Fans on Jaggie Fox Way. The building will be used for offices, storage and warehousing. Smith hopes eventually to hire 300 more employees.
Carey Smith leaned on one of his products at the groundbreaking for a 72,000-square-foot expansion of Big Ass Fans on Jaggie Fox Way. The building will be used for offices, storage and warehousing. Smith hopes eventually to hire 300 more employees.

For years, Carey Smith has had a perplexing problem. Each time his Lexington company, Big Ass Fans, adds office space, it seems to outgrow it shortly after moving in, even during the past few years when the economy has tanked and many businesses have been shrinking.

So it was no surprise while breaking ground on new digs last week that the "Chief Big Ass," the colorful title of the boisterous CEO who's always willing to punctuate his comments with a choice word or two, has planned for lots of future growth.

The new building will consolidate two existing locations in Lexington and needs to accommodate as many as 300 new employees whom Smith expects to hire on top of the nearly 280 he employs today.

The two-phase project will start with the seventh building for Big Ass Fans since its inception 13 years ago. It's a result, Smith says, of what happens when a business invests even in the worst of times.

While companies of all types were sending workers to unemployment lines in recent years, Smith didn't resort to layoffs. In fact, he still handed out bonuses, just not as big as usual.

"It would have to be horrible before we would start laying people off," he said. "And when we started moving out of the recession, these guys and gals were ready to roll."

Becoming 'Chief Big Ass'

It was a rocky road for Smith before Big Ass Fans. Or as he puts it, "I've been slogging on my own since '82."

He worked in reinsurance for a while and later wound up partnering with his father to develop technology to cool industrial buildings. In 1992, he and his wife, Nancy, an attorney, moved to Lexington. He started a company a couple of years later focused on that sprinkler technology.

"It was an interesting idea, but one of these things I always tell kids when I talk to them at universities is that if you're going to fail at a business, you want to fail fast," Smith, 59, said. "We failed slowly. ... It always seemed like if we kept going, it would get better.

"But we never sold more than a million-and-a-half dollars, and it was a lot of work."

He also said it was tough to convince people of the benefits.

"While we were able to cool the buildings down to a certain degree, it was obvious to me that moving the air within the space would be a good thing to do even in conjunction with what we were doing," he said.

And that's what led him to contact a small fan manufacturing shop in California whose ad he had seen in a trade publication. A partnership was struck in 1999. The California shop handled production of what would become the huge fans his company is known for while Smith sold them from Kentucky.

The company was known then as HVLS Fan Co., a nod to the high-volume, low-speed concept behind the fans. Because of their long diameters that stretch up to 24 feet, the ceiling and vertical fans move air because of their size rather than their speed.

A falling-out between the partners within a few years led to Smith going out on his own. That wasn't the only change in the first few years. Company legend has it that the "Big Ass" name originated from customers calling in and asking for, you know, those big-ass fans.

Great Recessionor great opportunity?

With the help of a direct sales force to establish better relationships with customers, zany marketing campaigns and products that solved a widespread industrial cooling problem, business at Big Ass Fans grew and grew. That was, until the fourth quarter of 2008.

"It got hinky a little bit earlier than that, but we didn't think too much about it," Smith said. "But by the fourth quarter of 2008, you could tell something was off."

The company still grew revenues for the full year, increasing to $37.7 million from $35.8 million, but sales were trending downward and in 2009 would eventually fall about 10 percent to $33.8 million.

"I sat down my management team, and said, 'I want to know how low we can go, how much business we can lose and still maintain,'" Smith recalled. "We figured that out, and we looked for different ways to supplement the gross receipts."

Before that time, the company had never installed its own products. So it started.

"A lot of people in industrial businesses saw sales fall 40 percent," Smith said. "That's what kept us from falling any more than 10 percent."

The company had been famous, "or infamous depending on if you were the finance director," for raises of about 10 percent and major bonuses annually, Smith said.

"We didn't give the type of bonuses I liked, but I gave everybody $500," Smith said.

For the year, the company made about $1 million in profit. "In essence, we broke even," said Smith, who went on to take aim at companies that laid off workers.

"From my perspective, the salary savings is just bull----," he said. "You could lay off half the people here, and it's not like it's going to save your company.

"I still have to pay the rent, and ... I think what you get on the other side of the recession is the ability to grow quickly."

Had he laid workers off, he would have had to eventually hire replacements and get them trained, a six-month task.

"At larger companies, you lay those people off and then you talk about hiring people back, but then you don't know because as a businessperson, you've got to see the sun coming up," Smith said. "One of the reasons it's been so slow to recover is people got so spooked by the recession that they don't want to hire on.

"But we already had everybody here ready to go."

The company's growth after the recession might be best described with its own "Big Ass" moniker. Sales jumped 47 percent to $49.7 million in 2010. They then increased an additional 41 percent to $70 million in 2011.

Smith is predicting about $100 million for 2012.

"We sold more fans this May than we sold the first five years we were in business," he told a crowd gathered at Tuesday's groundbreaking.

Big Ass in the home

Now the fans being sold include more than just the huge industrial models that earned the company its name.

The company had received requests for years from schools and churches.

"But it wasn't made for that. ... It makes noise. It's industrial," Smith said. "We realized with all the people calling — thousands calling — that there were a lot of people who didn't like their fans."

The company tweaked the diameter of its industrial fan line to be as low as 8 feet and introduced a model called the "Isis" in 2009. But now it's focused on something even smaller.

A few years ago, Smith began closely watching an inventor who designed a highly efficient motor and built a fan around it. Big Ass Fans purchased the inventor's company last year and in March introduced the "Haiku," a 60-inch home ceiling fan that uses the technology.

"It makes no noise, moves beaucoups of air and uses very, very little energy," he said. "One of the problems with normal ceiling fans is when you turn them up on high, they start wobbling.

"On this fan, every blade is hand-finished and balanced for every fan."

A black or white composite version of the Haiku costs $825, and a bamboo model is $995.

Targeting consumers, though, presents a new quandary for the company that's always believed in direct sales.

For now, they're selling the Haiku direct, but "I think we'll look for other ways to sell it," Smith said.

Where are they going?

Buying the Haiku technology and introducing the new product demonstrates what Smith says is at the core of his business: innovation.

"With manufacturing, people assume you're making a fan and it's always the same fan and you're always trying to cut the cost," he said. "But that's not how it works at all."

The company is plowing more and more funding into research and development, and it's also turning heads in the industry.

Big Ass Fans has actively pushed for establishing a testing standard for fans, said Gwelen Paliaga, a California HVAC engineer who leads a committee on thermal comfort conditions for the American Society of Heating, Refrigerating and Air-Conditioning Engineers.

"It's one of the more exciting developments in the air-movement industry," Paliaga said. "All of the manufacturers would have to report, just like when you buy a window, by law it has to be labeled with a rating for its performance.

"That would really be a big revolution because engineers and designers would be able to lay their products out in buildings and know what the results would be just like lighting designers do today."

The push is coming, he said, from companies like Big Ass Fans, which has been making a name for itself with its new ceiling fans.

"There is literally no one else in the industry who is taking ceiling fan products and pushing them like that," Paliaga said. "They're creating markets for themselves."

A Big Ass sale?Not a chance

With explosive growth, growing industry recognition and products sold in 50 countries, you might think a private company like Big Ass Fans is a prime candidate for an attractive buyout offer or a major investment stake to grow even more.

You'd be wrong.

"If you read certain magazines like Inc. or Fast Money, it's a success when you sell part of your business," Smith said. "That's horse (expletive). That's when you're letting some old fart tell you how to run your business and you don't need that.

"We don't need that because we're able to make money, and we don't need somebody else telling us what to do."

Bringing in someone else as a stakeholder creates the kinds of problems Smith says he avoided during the recession.

"We can do whatever the hell we want. There's nobody saying the stock price is down and do this to fix it," he said. "The fact that we're privately held makes a big difference."

Having investors leads to short-term decision making, he says, and he's a long-term kind of guy.

And that's what his employees like. Nick Williams, a special-projects manager at Big Ass Fans, started with the company in 2003 and now has the unenviable task of overseeing construction of more than 300,000 square feet of new space.

"When I started here, we had 21 employees," Williams recalled. "To be on the growth side of this experience is amazing, just to see how quickly things can grow and change."

That change is what impresses Lexington's business leaders, many of whom gathered to honor the company Tuesday for its new building and hiring plans.

"He moves decisively with a clear purpose," Luther Deaton, chairman of Central Bank, said in a statement about Smith. "That's what makes Carey and Big Ass Fans leaders. I admire those qualities about him."

Commerce Lexington CEO Bob Quick said Smith has often set himself apart from the pack of business executives.

"We have lots of people who tell us great things, but it's the ones who make it happen that you have great respect for, and that's Carey," Quick said. "If anything, he's under-promised and over-delivered.

"These are the types of entrepreneurs you want."

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