I read this great article on Inc. and it resonated so much with me that I wanted to share. This guy’s approach to business has been so successful that, overall, store sales have grown an average of more than 40 percent a year since he took charge. Nice, right?
What business lessons can you take from this article?
Jason Ballard remembers the time some guys from Home Depot came poking around in TreeHouse, his eco-conscious home-improvement store in a strip mall in southwest Austin. They were wearing suits and trying to act nonchalant, a ruse undercut by their questions to Ballard’s employees. How much of this does the business keep in inventory? How much of that did it sell last week?
“So I marched up and said, ‘Hey, I’m Jason! How can I help you?'” Ballard recalls. With a little small talk, he got them to say they were in town from Atlanta. Then he asked where they worked. They admitted they’d come from the big-box home-improvement giant. Ballard wished them well and cautioned his employees to say nothing more.
A wafer-thin 33-year-old with a deep East Texas drawl and boyish grin, Ballard doesn’t look like a threat to Home Depot. So far, TreeHouse has only the one location. It is on track to do about $10 million in sales this year, compared with Home Depot’s $83 billion.
But many of the most innovative brands in smart-home technology and sustainable design have embraced TreeHouse in a big way. TreeHouse is reportedly the largest single retailer of Nest products, for instance. It was among the first retail partners and is by far the largest of the much-admired Kentucky company Big Ass Fans. Perhaps most impressive, TreeHouse will be Tesla’s sole retail partner for the launch of that company’s highly anticipated Power Wall home battery.
TreeHouse’s biggest investor, Container Store co-founder (and fellow Texan) Garrett Boone, is fond of telling Ballard, “If TreeHouse doesn’t end up working, there is no truth in the universe.”
Boone, Tesla, and TreeHouse’s other fans like its earth-friendly mission: The bourgeois-bohemian goal of creating a Whole Foods for the DIY set. They are also impressed by an innovative approach that turns the superstore model inside out. Instead of a huge, warehouse-like facility with a vast product assortment, the company operates in a highly curated showroom with lots of space for consumer education, collaborative planning, and project-management. It’s less do-it-yourself than let’s-do-it-together. And TreeHouse’s prices are increasingly competitive with the big-box guys.
Like some of the disruptive brands it carries, TreeHouse harbors world-changing ambitions. Austin, with its wealthy neighborhoods and progressive politics, is a natural origin city for the business. But it is just ground zero for what Ballard envisions as a much larger company. “We will either be a multibillion-dollar business or we will go bankrupt,”he says. “Just like Tesla is not looking to be a boutique car company, we don’t want to be niche. This should become the new normal.”
Advice from a bishop.
Ballard, who grew up “behind the pine curtain” in deep East Texas bayou country, is the first to admit that his business philosophy is built on idealism and naiveté. It is those traits, he says, that have made him successful so far, despite long odds and high hurdles.
Ballard’s family comes from “the kind of poverty most Americans don’t know exists,” he says. “There are lots of people in my family who, part of their regular dinner involves possum and raccoons.” The biggest influence on Ballard growing up was his grandfather (“Paw-Paw”), a lifelong oil-refinery worker. Paw Paw lives simply — “like Moses,” Ballard says. A kind of default conservationist, Paw-Paw has electricity and running water but otherwise lives largely off the land.
The first in his family to attend college, Ballard studied biology and ecology at Texas A&M. After graduating, he became preoccupied with the wastefulness of standard building practices. Homes in the United States are responsible for more energy and water consumption, landfill waste, and human exposure to toxins than almost any other source. With no idea what to do about the issue, Ballard started working construction for sustainable builders in Colorado — just “swinging a hammer,” as he puts it. He thought about becoming a builder. Then another possibility presented itself.
“Everyone I worked for had the same problem,” says Ballard. “There was no one-stop marketplace for everything you need. It took a lot of time and diligence to find a good product. And then it would arrive and the color on the wall would look different than it had on a computer screen.” In addition, buying sustainable materials was expensive because builders often buy for one project at a time.
Ballard lacked formal business training or experience. But he saw the solution clear as day. Why not start a company that does a ton of product research, sources the materials, buys them at sufficient scale to bring down prices, and educates homeowners and builders?
He sent his idea to a close college buddy, Evan Loomis, who had worked on Wall Street. Loomis ran it past some colleagues, and they deemed it a no-brainer. If Ballard didn’t do it, someone would. Loomis quit his job, signed on as a co-founder of TreeHouse, and set out to raise money for the launch.
This was 2009, and the home-building industry was in shambles. It took more than two years to get traction; several times they almost gave up. Ballard seriously considered going to seminary and becoming an Episcopal priest. But when he consulted his bishop, the bishop told him to finish what he’d started. “Jason, it may well be that TreeHouse is your calling, and I want you to be open to that,” the bishop said.
Investors told Ballard and Loomis repeatedly that they didn’t want to back two twentysomething upstarts with no experience in the industry. Eventually, the pair recruited a pair of industry veterans – formerly of Home Depot – to become co-founders as well.
Treehouse finally opened in late 2011 with Ballard as a vice president and Loomis as CEO. It promptly missed all of its sales targets. From there, things got worse. Ballard’s wife was diagnosed with cancer and his daughter with epilepsy. Then the board let all the co-founders go, including Loomis, and installed Ballard as the new CEO. As Ballard turned 30, his entrepreneurial dream and his family’s health were failing. On the line to save his business, he turned to his faith. “It helped me keep fear under control,” Ballard says. “I just knew that, even if the worst happens, in the ultimate sense I was going to be OK. That allowed me to make some decisions that were very unorthodox.”
Bye-bye hammers. Hello Nest.
The original strategy, honed with the help of Ballard’s more experienced co-founders, was to be a kind of green Home Depot or Lowe’s, with long aisles of light bulbs and hammers and power tools stocked deep on tall metal shelving units. But “there was too much Home Depot influence in the beginning,” says Boone. The industry veterans on the team “were great guys, but we need to be a totally different kind of store.”
Boone, who is TreeHouse’s chairman, says it was Ballard’s vision that turned around the company. Rather than organizing the store around types of equipment, Ballard split TreeHouse into three “lands” based on performance, design, and the outdoors. Performance includes things like smart-home technology and solar power; design comprises flooring and paint; and outdoors is everything from organic fertilizers to rainwater barrels.
More important, most of the tall shelving is gone. The TreeHouse experience is now less about wandering the aisles looking for that one thing you need and more about discovering new things by interacting with the staff and products. Borrowing a page from the next-gen menswear company Bonobos, TreeHouse mostly avoids inventory in the store. It keeps only the bare minimum on hand: small items like light bulbs that customers need immediately. Everything else ships from the supplier. That frees up room for spacious product displays and explanatory placards, tables, and chairs for design or project-management consultations, and lots of natural light.
Emily Tanczyn, Big Ass Fans’ vice president of residential sales and marketing, explains that her company traditionally has relied on direct-to-consumer sales because it allows the kind of close contact with customers that ensures a deep understanding of the products. TreeHouse, she says, comes as close as it gets to replicating that relationship through a third party. As a result, “they sell tenfold what we find with other partners,” she says.
“Jason has this wonderful ability to simplify complex buying decisions for customers,” says Boone. “That’s the biggest barrier to buying home solutions.” He points to solar panels as an example. When TreeHouse opened, solar panels were stocked on a shelf in the traditional style. Customers failed to notice them or relied on installers to find the right products. Ballard switched things up, including in-store consultation and home installation in the price of the panels, plus simple financing and help with permitting. Now customers see not an intimidating product but a smart, simple way to save money. “He made it as easy as buying a refrigerator,” says Boone.
Another big change was product mix. Ballard dropped most of the basic tools and hardware — the hammers and nails — and focused on curating his ideal assortment of energy-saving, resource-conserving, and toxin-reducing products. Nest, the Bay Area maker of smart-home devices like intelligent thermostats and smoke detectors, was exactly the kind of brand TreeHouse should carry. But Nest — started by an Apple veteran and now owned by Google — worked with just four retail partners: Apple, Amazon, Best Buy, and Lowe’s. It wouldn’t even return Ballard’s calls.
Relishing the challenge, Ballard put a recurring notice on his calendar to call Nest the second Tuesday of every month at 9 a.m. After more than a year of rejection, he sent employees to buy Nest products at chain stores and document their experiences. Most of the chains’ salespeople knew almost nothing about the product or why it was worth $249. Ballard sent Nest a Power Point documenting those results and closed with a proposal for how his store would do it differently: He would work with Nest to tell the company’s story in full, provide project management to demystify the installation process, and turn TreeHouse into Nest’s largest volume retailer. Within a year, he had done just that. This success led to the Tesla relationship and others. Overall, store sales have grown an average of more than 40 percent a year since Ballard took charge.
Huge is the only option.
Ballard points out that his early options — to start TreeHouse or go to seminary — were more alike than one might think. Both were about doing good for people. And both were somehow “transcendent.”
“We just have got to find a way to shelter ourselves without permanently harming the world around us and ourselves,” Ballard says. “It’s an existential problem.” Ballard likes to say he doesn’t have a business but a goal. Building a business happened to be the best way to achieve that goal.
But a single-store, lifestyle business is not enough. To achieve a goal so ambitious, Ballard needs TreeHouse to be huge. Over the summer he raised $16 million in a second round of funding, led again by Boone. “We avoided venture capitalists altogether,” Ballard says. “I was very honest. I told people that if they needed their money back in three years, they should not invest. I said, ‘You are investing in a company whose CEO is more interested in achieving his goals than getting a quick exit for investors.'”
The money will fund the launch of at least two more stores in the next two years, in Texas and elsewhere in the West. To grow even faster, the company is considering hiring project managers in other cities, establishing networks of installers, and building a digital home-improvement platform.
Ballard is determined to avoid a Whole Foods-like reputation for high prices. That won’t be easy. Green products are often more expensive than traditional ones. And even when TreeHouse sells the same products as big-box chains, it can’t command the same prices from suppliers because its volume is so much lower. To compete, Ballard has opted to take slimmer margins, making up some of the difference by launching smaller stores, which his lean inventory model makes possible. Still, retrofitting a home tends to involve big projects, and that favors customers with means. An affluent clientele undercuts TreeHouse’s mission to be a store for everyone. The work continues.
TreeHouse is also “developing relationships with manufacturers and convincing them the only way we can all establish higher volumes is by being price-competitive,” says Boone. He points to Ballard’s doggedness with Nest as evidence of his effectiveness in such negotiations. “He’s incredibly persistent and fearless,”says Boone. “He’ll call anyone. He’ll call the president if he has to.”
While TreeHouse may still take a wrong turn or simply fail to meet its own expectations, Ballard has settled comfortably into the driver’s seat. His wife has been cancer-free for four years. She works in the store most days with her husband. And their daughter no longer has seizures.
TreeHouse’s original inspiration, Paw-Paw, has yet to visit the store. Austin is too long a drive for someone his age, he says. But Ballard recently learned that the 82-year-old widower has been traveling three hours to see a new girlfriend. “I’m proud of him,” Ballard says. “But I said, ‘If you can drive to see a woman, you need to get your butt in a car and come see TreeHouse before you die.'”
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