June 8 (Bloomberg) -- Few manufacturers succeed at wooing homeowners, companies, and government buyers. Big Ass Fans has managed to keep business flowing from each, selling all manner of fans, from ceiling behemoths up to 24 feet in diameter to portable versions on wheels.
While its larger competitors produce a diverse lineup of products, the Lexington (Ky.) company limits its offering to fans, spending about 8 percent of its annual revenue on research and development, according to President and Chief Executive Officer Carey Smith. That’s more than most, says Justin Molavi, an industry analyst for market researcher IBISWorld. “That’s what makes this company unique. They’re just looking at fans and then innovating on those fans and coming up with new technology.”
Big Ass Fans’ singular focus is paying off. Besides a 100,000-square-foot factory, Big Ass Fans has a 46,000-square-foot R&D lab in the same Lexington location, where engineers work on new products and improvements on existing fans. The company holds 10 U.S. patents on its technology and a total of 70 patents in other countries. Smith projects $70 million in revenue this year, up from $50 million last year. Next year, he expects nearly $100 million. For five years, the company’s growth rate has ranged from 25 percent to 30 percent, with the exception of 2009, when revenue fell 10 percent as a result of the Great Recession. The $43.7 billion market for heating and air-conditioning equipment is projected to grow 1.5 percent annually through 2016, according to IBISWorld.
The 210-employee company’s six different models are difficult for overseas factories to match without investing heavily in skilled labor and specialized gear, says Smith. Unlike in most other fans, Big Ass’s gears generate little heat from friction, making it possible to seal their gearboxes permanently and fill them with nitrogen, which keeps out damaging moisture. This makes it possible for the company to offer a 10-year warranty and charge $1,700 to $10,000 per fan.
The vertical winglets on the tips of the fans’ blades are its most visible innovation. Borrowed from airplane wing designs, the turned-up metal reduces air resistance, which makes it possible to run even the largest fan with a tiny 2-horsepower engine. In addition to saving energy, the design moves large amounts of air near the ceiling without disturbing papers on desks below. In the winter, warm air trapped near the ceiling is pushed downward, reducing heating bills by as much as 30 percent, according to Richard Aynsley, Big Ass Fans’ director of research and development. In the summer, the continuous circulation makes people feel cooler, which means less air-conditioning.
MASS Design Group in Boston used Big Ass Fans’ 24-foot ceiling fans in the 140-bed Butaro Hospital in the Burera district in northern Rwanda. The huge fans move germ-carrying air from the floor to the ceiling, where ultraviolet bulbs kill microbes. “Most people use a fan for psychological cooling, the feeling of the breeze,” says Alan Ricks, founding partner and creative director of MASS Design in Boston. “But these fans actually don’t generate a lot of draft, and yet still achieve that large amount of air mixing.”
Smith got into fans in 1999 with the $600,000 he had left after pulling the plug on his first company, SprinKool, which sold sprinklers to cool the roofs of large factories and warehouses in the summer. Smith had a hunch better fans would be popular after countless visits to stifling factories and warehouses. His big break came when he saw a trade magazine ad for a 20-foot ceiling fan made by a small machine shop in Riverside, Calif. “It was just serendipitous, really,” he says. For the first few years, Smith paid the shop to manufacture fans, which he sold and marketed through his company. In 2002, Smith paid $400,000 for the intellectual-property rights and launched his own manufacturing operation.
That same year he changed his company’s staid name, HVLS Fan Co., to its current, sassier incarnation to capture attention. Besides complaints from local religious groups, nearby Blue Grass Airport in 2008 refused to sell the company advertising space, Smith says. Today it’s a customer. “It’s amazing how little flak we get for it anymore,” Smith says. He says the company has given away more than 300,000 caps sporting the name and mascot, Fanny the Donkey. “Companies like Big Ass Fans have figured out that the best way to be competitive is to do more product differentiation -- through branding, variety, and quality -- and put something unique in the market that cannot be commoditized,” says Georgia Institute of Technology economics professor Vivek Ghosal.
Big Ass Fans eschews retailers and distributors in the U.S., using its own 65-person sales team to handle all sales and customer service. Outside the U.S., Smith is more open to using third parties to move product, with about 10 percent of Big Ass Fans’ revenue coming from overseas, including Australia and the United Kingdom, he says. Now Smith is contemplating expansion into the Caribbean and other tropical regions. “When people think about U.S. manufacturing, they ought to be thinking quality.”
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