Name and Title: Chris Baker, President & CEO
Company: Value Added Distributors
Location: Midlothian (Richmond), Virginia
No. of Branches: 19
No. of Employees: 200
Year Founded: 1987
Major Product Lines: York, Ruud, Armstrong, Mitsubishi, Hart & Cooley, Honeywell, Southwark
Give us a thumbnail sketch about yourself and your company?
Chris Baker: Value Added Distributors is a private, second-generation HVAC distributor based in Richmond, Virginia. Value Added Distributors is the parent company of our three subsidiary businesses: Virginia Air Distributors, Allied HVAC Distributors and South Carolina Air Distributors. We have 19 branches and 200 employees across six states. I represent the second generation and have been involved in the business full time for 20 years, plus a number of years prior to that in various summer jobs, mostly warehouse work. We celebrated our company’s 30th anniversary this year; man, how time flies when you’re having fun.
For a variety of reasons, I know that you attended and graduated from the University of Virginia, a fine school by everyone’s standards. But be honest with us, did you ever see the ghost of its founder, Thomas Jefferson, when you were on campus?
Baker: Didn’t see any ghosts. But TJ, as I call him, left a number of great legacies and traditions at the university. Most importantly is the honor system, which is truly unique and impactful for college-age students participating in the social experiment called college. Then there are the traditions I don’t think TJ had anything to do with, like Fourth Year Fifth, streaking the lawn, etc., nor will I confirm nor deny I took part in those. I took it totally for granted as a student, but Charlottesville is an awesome town. We love visiting with my young family; it’s a beautiful and fun town everyone should visit at least once – tourism plug now complete.
Chris, I don’t know your age, but you look like someone on the mature, young side? How does this affect your dealing with the “age” issue and with employees (like millennials)? The millennials seem to be popping up in all kinds of conversations related to HVACR and the changing workforce?
Baker: I’m excited about the opportunity and challenges that it creates. I might like change a little too much. Seriously, I think a lot of the things that millennials are looking for in a career fits with the strategic direction that we’re already headed. In particular, making sure our organization is truly passionate about taking care of our employees, customers and communities. We’ve got a lot of work to do, but the commitment and desire are there. In addition, we’re aggressively investing in technology that will help us deliver better customer service, but also, longer term, give our employees additional flexibility from a scheduling standpoint. This also allows employees to know exactly how they’re performing versus goals so they can know if they’re “winning” on a day-to-day basis, which improves their self-esteem and morale (and income). We believe those are things that both we and millennials value, so I think we have a common vision. One way or another, we’ve got to figure it out for this industry. It can be challenging to attract good talent. I strongly believe talent will be the biggest (you could argue it already is) differentiator between success and failure in the future for our business, especially with our customer service strategy.
Do you have a hobby or special interest that might surprise people?
Baker: Well, it’s probably no surprise that after college I had hesitations about going into the family business. I know, it’s hard to believe, as sexy and glamorous as HVAC distribution can be. I was a full-time triathlete (not a very lucrative career), bartender and swim coach. It was a lot of fun traveling the country, training hard, partying even harder, and with as many calories as I was burning, eating whatever and whenever I wanted (that by the way has ruined my ability to eat reasonably now). The pinnacle of that point of my life was completing the Ironman World Championships in Hawaii in 1995. Then finally, capitalism and the lure of a consistent and significant paycheck won me over, and I joined the business. It’s safe to say I’m fairly OCD, so between work and family, what hobbies I do have don’t happen very often, but I’m working on that with more customer golf.
What do you consider to be the best way to give advice to people?
Baker: Face to face and gently, although admittedly, I struggle with the gentle part. I think as we’ve grown as a company we also try to use data, when available, more often than our gut instinct to make a point.
You often say you’re a customer service company; everyone says that. What makes your company different?
Baker: We put our money where our mouth is. We have 12 customer service guarantees. The most famous is our three-ring phone policy where, during business hours, if the phone rings more than three times at any of our branches without someone answering it, we give you $100. Try it out for yourself by calling any of our branches, I dare you. In all fairness, we’ve developed a great reputation for customer service; it’s part of our culture. However, we’re in an industry with an incredibly low bar, so we’ve got to be careful in comparing ourselves to our competition. Our longer range goal has and always will be to be the “Best in the World,” which means we’ve got to compare ourselves with companies that deliver truly world-class service like Amazon, Chik-fil-A, Nordstrom’s, etc. I once had a senior executive at a very large HVAC distribution business tell me that a “customer service philosophy was not sustainable or scalable.” My reaction to that is B.S. We believe that our contractor customers deserve better and that their service to their own customers is severely limited by the poor service they receive from their current distributors. Our strategic and long-term bet is that if we can deliver world class customer service through culture, technology and people, we will be wildly successful.
Is there a book, fiction or nonfiction, that you keep rereading?
Baker: I am currently obsessed with Verne Harnish’s recent book, Scaling Up. In terms of business books, I think it started with Jack Stack’s The Great Game of Business. About 10 years later, The 4 Disciplines of Execution (4DX) picked up a lot of similar concepts and expanded on them. Most recently, Scaling Up took the ball and ran with it, again adding a lot of detail that I think is incredibly valuable and insightful for growing businesses. It focuses on four core areas: people, strategy, execution and cash. Unfortunately, it’s more a textbook than a weekend reader, so be prepared; also be careful reading it at bedtime because if you’re like me, you might end up with a few sleepless nights. We use a number of quotes and references from the book quite often, but the one we use most often is “revenue is vanity, gross margin is sanity, and cash is king.”
I recently received an email from you unrelated to the HVACR business. You were asking for donations on your Facebook page because you were seeking to raise money for the Crohn's & Colitis Foundation. Apparently, you have platinum status as a fundraiser. Please tell us why you’re doing it.
Baker: I was diagnosed with ulcerative colitis when I was 30 years old. It was scary, as the symptoms of the mildest of GI diseases are very similar to the most severe GI diseases, so until you have a scope (also no fun), it’s hard to get a good diagnosis. After 10 years of slow but steady worsening and correspondingly more aggressive medications (including one that had to be taken by IV every four to six weeks), I made the decision to take the surgical route and have my colon entirely removed through a procedure called J-Pouch. Without a colon, you can’t have colitis. It sounds good, but it’s a tough and long process. For me, it was two surgeries, 19 days in the hospital, and three months with an external bag. Life is great now, different, but much better. You see ads on TV describing the anxiety that GI disease sufferers experience, and it’s hard to relate to, but I can tell you firsthand, it is life altering. For a while, pre-surgery, I wouldn’t fly and avoided busy restaurants, even car rides with other people – that makes for a pretty miserable life. I’m on our local board, and it’s the one philanthropy I focus on raising money for. More than anything now, I do it for the kids that have GI diseases. It is hereditary, so there’s a chance my children might get it. I hope if that were to happen by then, we’ve found a cure.
What’s the best business move you’ve ever made?
Baker: Diversification. We started out as a small local distributor, selling only equipment from one main supplier. As we’ve grown, we’ve diversified our supplier base, which has, in turn, increased and diversified our customer base. Our first strategic diversification was to offer HVAC-related supplies, this in turn made us a more attractive one-stop shop for our customers. We now do more than $30 million annually in supplies. Our second strategic diversification was our acquisition of our two new businesses, Allied HVAC Distributors and South Carolina Air Distributors; this helped broaden our product offering and geography.
What is a business misstep that you’d like to take back?
Baker: I’ll give you the politician’s answer to this: none of them. In all seriousness, if you’re not failing you’re not trying hard enough. We tell our managers all the time if you don’t let your people fail they’ll never learn. It is an incredible way to get very memorable experiences, so for that sake, all of our mistakes have helped teach us how to do it better going forward.
What is your No. 1 tip for business people, especially young individuals entering our industry?
Baker: Eighty percent of success is simply showing up. Work ethic is something that certainly can’t be taught, and let’s face it, we’re not rocket scientists; this is relatively simple stuff. As I mentioned earlier, our industry is not glamorous nor sexy, so we don’t get a lot of first looks when it comes to career choices. I also tell talented young people who are entering our industry that there is incredible opportunity because our talent pool is fairly shallow.
What do you see as the biggest threat or disrupting element in the HVACR business during the next five years?
Baker: Easy, the internet and it’s already happening. Unfortunately, as we look at the current channel, it’s distributors that will likely be most impacted by this disruption. Manufacturers have their factories, and contractors have their service departments (where most change-outs start). Sure, we (distributors) have facilities, inventory and local support, but advances in technology and logistics can challenge those. Our industry, like other service trades, has been relatively slow to adopt technology and change. In addition, consumer behavior has remained the same; we still buy A/Cs the same way we did 30 to 40 years ago. As millennials become more and more of both our workforce and consumers, something (I wish I knew what) is going to happen, and I’d bet it will be very disruptive to our traditional channel. I’m not sure if it will be Uber-like disruption, but there is always that chance. Our job as an industry is to make sure we’re prepared and involved in this change, whatever it may be.