Anarchy & Resolve
By Richard Wright
Anarchy def. a state of disorder due to absence, or no recognition, of authority.
The month was April; the year was 2009. It was a deep part of the Great Recession and the country was in a very dark mood. The day had to be a Friday, because “it seemed as if there was a Black Friday every week,” according to Ross Morrison.
That was when Morrison, Rob Sloan and Lori Statler were laid off from their jobs at Hearth & Home Technologies (HHT). Morrison (1990-2009) was a Brand manager, and had overseen Marketing and Product Development functions. Sloan (1992-2009) was in Sales as a Regional manager, and also helped out on Product Development, and Statler (1993-2009) was also in Marketing.
Morrison and Sloan could sense that their time at HHT was coming to a close, and they began to develop a business plan. They would meet for breakfast once a week, and were actively designing a small wood-burning insert.
What they lacked was the engineering and drafting skills needed to create, test and refine the products they had in mind. “So we asked Rick (Berg) and Gary (Butler) to lunch and just picked their brains,” said Morrison. Both Berg (1993-2009) and Butler (1993-2009) had been hired by Ron Shimek back in the mid-’90s, and had been responsible for winning a number of Vesta Awards, and patents, through the years.
Berg had already left HHT, and was on his own doing custom fireplaces, some very expensive ones, in fact. That got the attention of Morrison and Sloan; selling products in the high five figures is certainly more appealing than selling a $2,200 36-in. box. Butler stayed on for a few more months at HHT, working on a few products and trade show stuff. He joined the group a bit later.
|Viewpoint Series VP-36T DV gas fireplace.|
It became obvious to all that they had the complementary talents needed to create a company. According to Morrison, “We said, okay, we’ll take care of this side (Sales and Marketing), and you go back there and build the products.”
Now, back to the word “anarchy.”
The four guys have equal interests in the company. Initially there was no CEO or president, at least until they learned they needed one. At that point, they wrote titles down on pieces of paper, put them in a hat and pulled out the four titles needed to form the company. Technically, Rick Berg is president, but actually they all have an equal say.
Anarchy? You decide.
|L to R: Rick Berg, Ross Morrison, Gary Butler, and Rob Sloan, in front of an Impressions series custom fireplace.|
How many employees do you presently have, and count yourselves.
Ross Morrison: “There are only eight of us all together.”
What’s the square footage of your facility?
Morrison: “We share the facility with a distributor, so all together it’s 44,000 sq. ft.”
What percent of your business is custom?
Morrison: “It’s about 70 percent. For the 30 percent, we have a couple of direct-vent, single-sided fireplaces – we call them Viewpoints – in two different sizes, and then both modern and traditional. We have two linear fireplaces, a modern and a traditional, and then two sizes of direct-vent inserts.”
My understanding is that, in 2015, when you won a Vesta Award for the Epiphany Glass-tube Burner Fireplace, it was going to retail for about $70,000, correct?
This year you won awards for both the Aspiration, and the Impressions line. What’s the retail pricing on those units?
Morrison: “The ones we received the awards for are going to be more in the mid-30 range.”
When you discuss the future of the company, going out five years or so, where do you see it going? Do you want to go from say a $10,000 fireplace right up to $100,000? Do you talk in those terms?
Morrison: “We’re continuing on two paths. We are not saying that we need to be in an $80,000 marketplace. We have a unique skill set with our designers and with our product development background. We tend to get more of the oddball custom work. You know, the really large, really tall, oddly shaped ones that some of our competitors aren’t as interested in doing. We’re happy to do them, and we’ll price them accordingly.
“But we’re trying to get more production-oriented so we can keep our costs down and deliver a more cost-friendly product to our customer base. We have a lot of ideas for more production-level products that we’ve been working on over the last couple of years. We want to expand our standard line of products as well.
“I like to tell our dealers, or prospective dealers, that everything we design we also throw a little top spin into it. We couldn’t compete with a Heat & Glo with a standard 36-in. firebox or a Napoleon or anyone else. So we have to do something with a different look, a different idea as far as aesthetics, or the installation, or the serviceability that can set us apart.”
|CML-58 contemporary linear DV gas fireplace.|
How many dealers do you have right now?
Morrison: “It’s hard to know because we have some two-step and some dealer-direct. I imagine it’s somewhere around 120 now.”
So Rob is out knocking on doors on a daily basis and trying to enlarge that field?
Morrison: “He is. In fact, I do a little bit of it on the sales side as well. He’s on his way to Atlanta right now to work at a dealer event. We go to the HPBExpo, and we have had great success there. It’s been a great show for us the last few years; that show is helping us tremendously.”
So what is attracting them has to be the 30 percent, the production stuff, right?
Morrison: “When retailers look at our production models and we explain why they are different, usually they say, ‘That’s kind of cool.’ Then we tell them there is more to it than just cool looks. That captures them. There are also some guys who walk in and see a glass-tube burner and they are mesmerized by it. That attracts them and they’ll start asking questions.
“I think a lot of dealers have been shying away from the customs because they think they might be too difficult to sell, but in the end it’s just a large fireplace. They have been doing that for years.”
Perhaps they are concerned about problems they might encounter with a product such as that, because a $70,000 product is probably a little more complex, and the dealer most likely feels more responsibility if he gets a call at midnight saying, “I’ve got a problem. Come on over.” Is that a concern?
Morrison: “A few people have brought that up because we do power-vent everything, and not everyone is as familiar with the power vent as they are with a traditional direct-vent. If they have a meter, they check a couple of wires and it’s the same systems they grew up with, just on steroids. So it’s not too hard to troubleshoot, and we design the products so they can be accessed in a variety of different ways after they’re installed. That makes it easy to get a pair of hands in there and fix the issue.”
|LG-INS DV gas insert with Signature four-sided decorative front.|
Which one of your production products is the best seller?
Morrison: “Viewpoint 36 traditional.”
What is the retail price on that unit?
Morrison: “Suggested retail is $3,400.”
I would have guessed it would be a linear fireplace at this point. Do you see it heading in that direction?
Morrison: “Actually, we’re thinking that people might start to get a little tired of it. Linear units have been out there for quite a while now, and so many manufacturers are in the marketplace. We’re actually thinking that the market wants to move in a little different direction. Different buyers are coming in looking for different things, and that’s probably what fueled the linear units back 12, 15 years ago.”
If linear fireplaces are getting a little old, where are designs going from there, or is that something you would rather keep close to your vest?
Morrison: “Well, after polling our customers, there are two different camps. Some are still interested in a smaller, shallow box that can more or less hang on a wall, not too far removed from the old Bed and Breakfast, but updated from there. The other side is looking for larger, clean-faced units and even more of a square opening, which isn’t new or original by any stretch, but it seems to be a good market for us.”
Do you actively pursue the custom home channel?
Morrison: “We do. In fact, that’s where we’re making our money, because we have a different look with the fireboxes. We have a bigger view for the amount of footprint that our Viewpoints require, particularly if they are in a corner installation. It’s a different design with a 90-degree firebox so it wings out the viewing area. They are good-sized openings, but they don’t take up more space in a room than a conventional 32- or 36-in. unit. That gives us a better advantage. Then, of course, we put a little more money into the logs, flames, etc.”
Do you have any plans to introduce outdoor products right now?
Morrison: “The outdoor season is over already, but, yes, I think next year we’re going to introduce a couple of things at the show.”
There’s a need for better designs for outdoor fireplaces. I think that’s what a lot of people will be looking for, rather than the same old, same old.
Morrison: “I agree. If the homeowner is going to invest in something outside, then they probably have the wherewithal to invest in something that is just a step above and not something they could have purchased 10 years ago.”
You’ve introduced at least three very expensive products. How large a market, in that price range – say, $30,000 to $100,000 – do you see out there?
Morrison: “It’s hard to know. We’ve been working up a pretty small base of customers here the last three or four years, and it’s going well for us. On the supersized ones, there might be 200 or 300 of them, something like that. It’s not massive, but there are not a lot of us that do it. Surprisingly, it’s not necessarily commercial. It’s a lot of individuals who are pretty wealthy and whatever they want they are going to get. They’re not asking what the price is. They’re asking, when can they get it.”
|Custom seven ft., three sided fireplace with ribbon burner, mirrored end panel, and LED media lights.|
Now, Montigo has done a very good job with custom products, correct?
Morrison: “Yes. We consider them the big guy on the block and, of course, some other brands have jumped in with some nice designs. So it gets a little more crowded. Some of them say they’re custom. We look at them as more semi-custom, or even production, because they are really stock products in four- to five- to six- to seven-foot lengths. We’re more into somebody wanting a four-foot 2 3/8-in. length; that’s what we do. We’ll build it the way the customer wants it. We have a UL blanket approval so we can build all of these different increments from two feet up to 2,000 feet.”
When you look around you must see ample opportunity for growth, more than you can handle right now.
Morrison: “We’re excited about it. We are continuing to grow with new customers, so it has worked out well for us, and it’s a manageable growth and not a pressured company in its youth. We moved to a new building. We have some space and our legs underneath us, and we’re ready to go into more of an attack mode.”
As we speak, do you have orders in and are you actively working on other custom products?
Morrison: “Oh, absolutely, yes. We’ve got a whole slate of them set up right now, so we’re at various stages from design all the way through to where we are producing products right now to go out this week.”
Are a lot of these coming through your dealer network?
Morrison: “We do get some from the dealers. A lot of them are coming off of our website, and then we’ll flip it around and call out to our dealers and say ‘Okay. We’ve got one coming at you.’ So we’ll be calling them as much or more than they are calling us.”
When you design products, are you actively trying to hit a certain range of margin for your dealers so they can make money and be happy with you?
Morrison: “We do, yes. Outside of the super custom stuff we’ve been talking about, we understand after all these years that it’s not easy to sell an $8,000 fireplace. On the flip side, we’re not going to be offering things in the low $2,000 range. We know there’s a price point up there. We can make a little bit of money. Our dealers can make some nice money, and there is still a good consumer base out there that doesn’t want a cookie-cutter box put in. That’s where we’re hitting it.”
What have I not asked that you would like to get out?
Morrison: “Our idea behind everything is to look at it differently. We’re not trying to be the same old, same old. We strive to have a unique perspective and so far, for the most part, we’ve been hitting it well. That’s where we’re headed. We’re not trying to displace any of the big brands in somebody’s showroom. We could just be a healthy Number 3 brand in there and be very happy with that. That would give their showroom a different look. That’s our goal.
“Rob likes to call us the Little Engine that Could and, seven years later, we made it. We started a business in the worst economy in decades – maybe not the smartest decision at the time – but it has worked out and we’re growing, and we’re hoping that people will take a second look if they are interested in another line that is not the same.”
That’s called “Resolve.”