Innovation

Ask the Legends: Lee Valley Tools’ Leonard Lee

Written by ProfitGuide Staff

President
Canica Design Inc. Almonte, Ont.
Founder and Chairman
Lee Valley Tools Ltd. Ottawa
Age: 70

Career Highlights

  • While working in the federal department of industry, in 1977 Lee opens a part-time mail-order business selling do-it-yourself wood-stove kits
  • In 1978, Lee adds specialized woodworking tools to his mail-order catalogue and leaves the government to launch Lee Valley Tools
  • The 1981 postal strike forces Lee Valley to open its first retail store; today, it operates 13 outlets from Halifax to Vancouver
  • Starts Veritas Tools, the manufacturing arm of Lee Valley, in 1985
  • In 1998, Lee launches Canica Design, a producer of revolutionary wound-closure systems
  • Is made a Member of the Order of Canada in 2002
  • Today, Lee Valley boasts annual sales of more than $100 million

What singular business achievement are you most proud of, and how did you make it happen?

Yusef Chaudhery
Toronto

What I’m most proud of is growing from a small firm to what is now North America’s largest company dealing with woodworking and gardening hand tools by mail order. It’s nice to have been able to do it from the Canadian side of the border. We actually took a fair amount of market share, primarily because we started with a huge emphasis on customer service and research and development. Other retailers didn’t do any R&D or any manufacturing, and as a result, they couldn’t buy as intelligently. And, of course, the customer recognizes factual and accurate descriptions of tools, and we could do that better than others because we have more experience.

How does Lee Valley differentiate itself from its competitors and survive, especially with big-box stores such as Home Depot around every corner?

Joanna Leung
Toronto

We do it by hiring people who like helping others, preferably those who are already gardeners or woodworkers—it’s the single most important thing to look for in an employee who will be working with the public. And then we train them on our product line, because product knowledge is really the most critical thing in good customer service. Everyone knows what it’s like to walk into a store, ask a salesperson something and get a vacant stare. You won’t get that in our 13 stores. Our employees know what they’re talking about and they have no incentive to upsell anybody. They are instructed to solve the customer’s problem at the lowest cost to the customer, because then the customer will come back and spend as much money as they can afford in our store, because they like the product and they like the service. It’s a different approach.

How did you raise capital, and how do you recommend other new businesses raise capital?

Fred Spinola, VP of Operations
The Zachry Group, Calgary

For Lee Valley, we raised capital with sequential mortgages on our house. But entrepreneurs should focus more on what they do with their money than how much they have. And what’s critically important is controlling your cash flow when you’re new—it’s more important than profit. But I really don’t have any recommendations on how to raise money other than to say, don’t borrow from friends if you want to keep any of them.

What tools did you use to drive sales at the beginning of your business ventures?

Jennifer Ansell
Toronto

From the very beginning, I thought, “I’m going to do business the way I wish other people would do business.” A big thing was pricing. I hated going into a place to buy lumber and they’d ask, “Are you a contractor?” I wasn’t going to lie, so I’d say no, and I’d pay a higher price. I decided that the best price in our business would go to the individual consumer. It was an excellent decision because it made everything very simple. You didn’t have to worry about discounts, because there were no discounts; the government paid the same price as Joe Blow walking in off the street. The government didn’t understand that. They used to send us quotes for their requirements, and we used to stick the quote inside a catalogue and send it back saying, “The prices are right there in the catalogue.” They’d phone us back and say we didn’t understand, and we’d tell them that we understood very well. We stuck to it, and eventually the government and General Mtors bought from us, because we sold stuff that nobody else did. That’s another part of it: we kept to our specialty and expanded on it so that we were best in our niche. And we laced this all together with a series of service standards and policies that reinforced this. I mentioned earlier, we had nobody on commission and the policy was always to solve the customer’s problem at the lowest cost to the customer. And people who are Lee Valley customers always complain about buying more than they ever intended to buy when they came in, and that tends to happen if you have good information systems and good people on the counter.

How does your experience with Canica compare to that with Lee Valley?

Dwight Campbell
Peterborough, Ont.

The major similarity between the companies is that if you hire good people, you will do well at what you do. Canica has excellent people, and it’s fun to be back at a small company—there are only 15 people here. But I was just like so many other people who believe that if they have started one business, then they are God’s gift to the commercial world. Well, I was humbled soon enough. The big difference with Canica is that the healthcare market in Canada is not rational. I didn’t know that when I listened to a doctor friend of mine who suggested I should design a good scalpel because one isn’t out there. Working in an irrational market is difficult, and it’s something I had not anticipated. But what we have done is develop an entire system of wound care that’s a huge advance over anything that previously existed. Our biggest single customer at the moment is the U.S. Army, given the problems they have in field hospitals in Iraq and Afghanistan. They’re pretty picky customers.

You’ve always had a successful mail-order business, so why did you get into retail?

Mac McDonald
Pickering, Ont.

In 1981, there was a national postal strike that lasted six weeks. Around the end of the sixth week, [then Canada Post head] André Ouelette said, “I can’t accept that businessmen have to rely on the post office to make a living. If they do, they better find other ways.” That’s a direct quote. I heard that at six o’clock in the morning, got out of bed and stubbed my toe on the bedpost. By the time I got to the office, I was a seething mass of rage, and I decided to put a full-page ad in the newspaper just to vent my spleen. But I also decided we had to have stores. We were losing $1,000 a day at the time, and we just didn’t have the money to afford it—it was only three years after we started. It’s more efficient in this business to do mail order, because you don’t have to pay for all the real estate. But we couldn’t let the business be crippled, so we diversified into retail.

Originally appeared on PROFITguide.com
FILED UNDER: