'Laser-like' focus on its small segment and aggressive marketing keep the manufacturer a step ahead
Chesapeake Light Craft owner and CEO John Harris makes his success sound easy. Even at the height of the recession his boat-kit business saw growth.
Its worst year-over-year growth was 2.5 percent between January 2007 and the same month in 2008, he says. How did he do it? Harris ticks off his playbook for growth in a tough economy: stick with your niche, diversify aggressively into less-expensive items, merge with two competitors, double-down on marketing and have an “hysterical” focus on customer service.
“So many people seem to get completely hung up on profit,” says Harris, 38, whose company is based in Annapolis, Md. “You’re going to die without profit, but on the other hand an obsession with profit leads to high prices and low volume. In turn, the low volume leads to a lack of critical mass in the marketplace and leaves you susceptible to economic shocks.”
He says profit is something to work on every day. “But without the sales volume, profit can become an academic issue, to put it mildly,” he adds. “So stop trying to pocket a huge salary and get your product or service out there, first and foremost. If it’s a good product, the rewards will follow.”
Harris was recently honored by the state of Maryland with a “Better with Less” award. The new awards program highlights businesses and non-profit organizations that have succeeded in tough times through efficiency and innovation. There was one recipient in each of the state’s 23 counties and the city of Baltimore.
“I’ve seen the genius of the private sector at work,” says state comptroller Peter Franchot. “My visits to businesses and non-profit organizations across the state have given me a true appreciation of their ability to create good-paying jobs, generate economic activity and deliver quality services in the midst of an economic crisis. Those of us who serve in state government have an opportunity and an obligation to learn from these best practices of the private sector as we get our own fiscal house in order.”
Despite the title of the award, Harris says he has not cut or downsized his business since 2004. One or two staff members left and were not replaced, but that’s about it, he says. At the end of 2009, some positions were restored and the company is up to 15 employees.
How it began
Harris designed and built his first boat — a rowing shell — at age 14. Despite earning a degree in music, his second love, he says he was “focused like a laser” on being a professional boatbuilder.
He joined Chesapeake Light Craft in 1994 and bought the company in 1999. As CEO, Harris began to expand the business. He added more rowing and sailing craft; upgraded the instructional materials, including the videos; kept up a busy boat show schedule in the United States; offered more boatbuilding classes; and established overseas dealerships in Japan, Australia, the United Kingdom and France.
He also has pursued alliances with companies that benefit from the company’s expertise in boat-kit manufacturing, including WoodenBoat magazine, the WoodenBoat School, Guillemot Kayaks, Shearwater Boats and the U.S. Naval Academy.
Harris has taught at the WoodenBoat School in Maine since 1999 and has led more than 50 boatbuilding classes and workshops. In 2001, he wrote, co-produced and starred in a series of television shows about boatbuilding for the DIY Network that ran for several years. Also that year, he wrote and produced a one-hour boatbuilding video for Chesapeake Light Craft that sold thousands of copies.
Stay in your niche
Harris says the decision to stick with his niche and resist the temptation to expand to other areas was crucial to his success during the downturn. “I’ve resisted all temptations to get into custom work, boat repair, custom design and so on,” he says. “We could do that, and there have been occasional forays, but I think if you’re lucky enough to have a tiny niche, you ought to fight like crazy to hang on to your niche and just keep getting better at it.”
Harris did expand the number of products the company offers, diversifying into less-expensive items. “In 2005, 60 percent of our individual orders were $1,000 or more. In 2010, 60 percent of the individual orders were in the $100 to $300 range,” he says. “That was a very deliberate business decision on my part. CLC has quite a following, and the following doesn’t disappear during recessions. They just don’t spend as much money. In 2006, I felt really strongly that when the next recession came I would rather have a steady stream of small orders rather than zero $1,000 orders.”
He says that’s a “hard leap” for some business owners. “If you sell big-ticket items, whether it’s $1,000 or $100,000, the volatility in cash flow can be catastrophic when things go south,” Harris says. “I’m convinced that the adjustment in our business model to sell inexpensive boat plans and accessories with as much vigor as we sell our $1,000 to $2,000 boat kits kept us going through the dark times.”
Harris credits marketing vice president Matt Cordrey for working “night and day for years” to build a new website that was more effective and efficient in selling accessories alongside the flagship boat kits. Merging with two kit companies in New England also helped diversify product offerings.
“I think I’m a pretty good boat designer, but a single new-boat kit at Chesapeake Light Craft can take 18 months and tens of thousands of dollars,” Harris says. “We went from 25 boat kit models to over 70 in just a few years. Even at the level of a tiny company like CLC, mergers and acquisitions are a great way to fortify your balance sheet.”
Chesapeake Light Craft also increased its marketing during the recession, a key element for success. “I just can’t understand how a business with falling sales thinks that they can’t afford marketing,” he says. “People don’t stop shopping and absorbing your message in a recession — they just stop spending. As soon as things shake out a little they’re going to remember the guys who stayed visible.”
And that marketing component includes the use of e-mail and social media. “I don’t know if Facebook and Twitter are going to last or not, but I can say that it does incredible things for us,” Harris says. “Whatever comes along in a few years to replace Facebook and Twitter, you’ll find CLC beating the drum there.”
E-mail is critical, too. The company sends out a newsletter-type e-mail each month. Lastly, Harris is fanatical about customer service.
“We definitely don’t always get it right, but I think the whole thing about exploiting a niche is developing a loyal following,” he says. “Bottom line is that we spend a ton of money trying to take care of our customers. When we get it right, the rewards are astronomical. When we get it wrong, we deservedly get pummeled.”
Harris continues: “But I still look out at my fellow marine tradesmen and see shops struggling with the fundamental concept that the customer is always right. One reason I put my small cruising sailboat on the hard a few years ago was because I couldn’t find marinas in Annapolis who could be bothered to return calls for small maintenance and upgrade jobs.”
Chesapeake Light Craft grossed about $3 million in 2010 — that’s up 31 percent from 2008 and the worst of the recession, Harris says, humbly adding, “I bet most gas stations gross more, just to keep things in perspective.”
Harris divides the business into two categories: boat kits and everything else. Cordrey, he says, has created systems that allow CLC to add “everything else” as fast as it can, and that’s what Harris is doing.
“We’ve been adding new boats steadily but slowly,” he says. “Since the boat kits drive all sales at CLC, obviously it’s important to keep refining our existing models and to add new ones. For the first time in years I’m hoping to actually invest money in the boat kit side of the [business], as opposed to just feeding that side of the business a little at a time as we can afford it. It’ll involve some hiring and reorganization.
“Check back in a year or so to see how all of that actually panned out,” Harris adds. “Like all growth initiatives, it’s a gamble. At least part of that big initiative is to work on integrating greener materials, like bamboo, into our wooden boat kits.”
This article originally appeared in the August 2011 issue.