By GAWDA Published: October 1, 2013
With locations in five states, this independent has found the sweet spot
Bill Baxter is one of the few industry leaders who did not grow up working in his family-owned company. His father, Pat Baxter, and a business partner opened Holston Gases in Knoxville, Tennessee, in 1958. Sole owner by 1976, Pat Baxter respected the fact that his son wanted to find his own way.
Bill Baxter became a lawyer and grew fascinated with Holston while doing some of its legal work. At the age of 28, he ended his law practice and became an apprentice at Holston Gases, learning the business from the bottom up. “On my first day, I was handed a broom and sent to the back of the plant.” Baxter’s introductory training took two years across the entire operation, from cylinders to trucks to dispatching, shipping and receiving. He rolled cylinders, worked the sales counter, did outside sales, then managed staff. He learned about every gas produced by the company and worked his way through the entire organization, earning his stripes among the other employees. In 1985, four years after joining the company, Bill Baxter became president. His father Pat died in 1987. Those six years working together, laid the foundation for how Holston Gases is run today.
Diverse Products and Services
Holston has grown to 23 locations throughout five states – Tennessee, Kentucky, Alabama, Virginia and North Carolina. Its largest customer base is metal fabrication, due in part to the growth of the automotive industry in the south. Industrial, medical and specialty gases make up 65 percent of the product mix. The rest is hardgoods, safety supplies, even custom-made band saw blades for use on wood. Services include hydrostatic re-testing and acetylene requalification. A medical gas division, restaurant CO2 division and a fully developed propane division add to the diversity.
About 20-25 percent of revenue comes from propane, supported by the mountainous terrain in East Tennessee that does not lend itself to natural gas lines. Holston Chairman Bill Baxter likes propane because it’s simply one product with uniform delivery and storage. Over one million gallons of propane are stored, and a fleet of more than 30 bulk propane transports and bobtails deliver it. A 360,000-gallon rail terminal runs 22 to 24 million gallons a year. Two rail spurs are located at the terminal, enabling eight rail cars to be filled at a time. A computerized forecasting system insures on-time deliveries.
‘Holistic Approach’ to Metal Fabrication
To further distinguish itself from its competitors, Holston has developed what President and CEO Robert Anders calls a “holistic approach.” A staff engineer visits customer sites and checks everything to do with a customer’s welding process, including the monitoring of wire feed speeds. Bulk lines and tanks are checked to make sure there is integrity in the system. A test is run on the gas flow to identify what it really is, and often it’s different from what the customer thinks it is. Says Anders, “We look at the customer’s welding process, the gases, filler metals and power source being used…the whole gamut.”
After analyzing the customer’s processes and breaking down the data and test results, the Holston team determines how inefficiencies can be reduced and where the customer can bring home real savings. Anders indicates this approach has proven a big success for the company, and describes a customer for whom they realized a million dollars worth of savings in one year. “In today’s tight economy, that is real dollars they can take to the bank.”
Holston surveys both large and small customer sites. Small shops using 25 to 30 cylinders a month have seen savings of $5,000 a year. Likewise, plants that have 75 robots and 150 handheld units experience a lot of money going out the door in that process. “If we can help them with their deposition rates and gas consumption, the savings add up pretty quickly,” says Anders.
To conduct the surveys, Holston hired an electrical engineer who was familiar with welding, and then hired a retired Praxair engineer as a consultant to teach the engineer about the gas processes. The survey has proven to be so successful and sought after by customers that Holston is now bringing the training in-house to the sales force. Says Anders, “We don’t expect our salespeople to be welding engineers, but we are educating them on the process so they can recognize opportunities. Sometimes there is very low-hanging fruit, and salespeople are often the first to see how a process is being performed.
Entrepreneurial Managers Hold the Key
“At a time when everyone is trying to find synergy through centralization, we’ve done the opposite and are very decentralized,” says Anders. Holston does not have layers of management, and until last year, didn’t have a vice president. As the regional strategy was developed and strengthened in Kentucky and Alabama, two vice presidents were appointed. Phil Kirby runs the Kentucky region; Melvin Gay runs Alabama. But it’s the branch managers who are key to the operations. Anders explains, “They run our businesses, and we want them thinking like entrepreneurs. We want our managers to be the face of Holston Gases in the cities where they are located, so they are given a lot of authority to make decisions. This gives them flexibility so they can tailor operations to the customer base.” Incentives are based on concrete performance metrics that include profit margin, accounts receivables and inventory turns.
“Of course,” adds Bill Baxter, “we have to hire the right person, someone who is motivated, who is interested in people and wants to succeed. We’re not interested in the corporate cog, the 9 to 5 individual. We’re interested in people who want to run a business. We want people who can control their own destiny, and progress on their own abilities and efforts.” When it’s working right, Baxter says it’s rewarding. When it’s not, the manager knows that it’s his or her issue to deal with and do something about.
Several second- and third-generation employees work at Holston, following in their parent’s footsteps. One of them, Joe Baxter, 29, unlike his father, always wanted to work in the family business. He currently serves as the store manager in Lexington, Kentucky, and has embarked on a training program to learn every aspect of the business. Says Bill Baxter, “There’s something special about a family business opportunity, and if it’s handled right, it’s great for everybody involved, not just the family that owns the business.”
Robert Anders points to one of the challenges independent companies face when a large national distributor enters their market. “Often, big companies bring in the technology and assets that smaller companies don’t have, and all of a sudden the small company can’t compete.” Holston’s goal was to get to the position where they could duplicate the technology and assets of the large companies. “It resonates pretty well in the marketplace when you can do that and then bring the philosophy and approach of a local, privately held family business.”
Holston is about 25 times larger today than it was when Bill Baxter joined the company 32 years ago. About two-thirds of this growth is organic; the rest is from acquisitions.
When looking for companies to acquire, Baxter first looks at a business’s reputation. “The last thing we want is to buy a company that does not have a good reputation, and then try to change it. That’s a hard thing to do.” Baxter is interested in companies that treat their customers and employees well, are viewed in the local community as a hometown supplier, and are run with a healthy cash flow. Also important is how a company treats its cylinders. “That’s very important to us,” says Baxter. We want to know how they have taken care of protecting the ownership of their cylinders.” Holston Gases owns over 125,000 cylinders.
Bill Baxter would like to continue making tactical acquisitions, growing internally and adding product lines. He says. “We’re proud to be one of the largest independents in our industry. Obviously, the national outfits have their place and there will always be a small multitude of independents, which I think is very healthy for our industry. We’ve found the sweet spot, big enough to play defense when it’s needed and small, quick and agile enough in local flavor and how we do business.”
New Facility Adds Opportunities
In February 2013, Holston Gases moved into a new $10 million facility located three miles from its original headquarters. In 2011, the company purchased a 20-acre brownfield site, hired local contractors, cleaned it up and redeveloped it into a state-of-the-art facility containing administrative headquarters, a warehouse, fill plant and training center. Several components make up the complex: a 32,000-square-foot administration/warehouse building; a 25,600-square-foot fill plant; a 3,200-square-foot retail propane building; and 17,600 square feet of covered work and storage areas.
A training room seats 50 students. Located next to it is a lab where gas mixtures are piped in and tested. Students easily go from the classroom setting directly to a field setting to learn hands-on, then go right back to the classroom for more learning.
The crown jewel of the new facility is its automated fill plant. The old one was no longer efficient and did not provide repeatability. Anders says, “The ironic thing about these fill plants is people think they are really hard to run because they’re fully computerized. They think people have to be hired to run them and they have to be trained for months and months. But it’s actually the opposite. The old fill plants were much more skill-driven than these new plants. We had to closely watch valves and gauges and open and shut them at the right time. Now that it’s completely automated, we just hook up the tanks, go to the kiosk, push the recipe button and then move on. Our automated fill plant is having a great impact on our efficiencies as well as our bottom line.”
Holston Gases’ mission is to be one of the most profitable and respected companies in the industrial gas industry…in the country. Robert Anders calls it the driving goal. “The greatest asset we have as a company is that we truly believe and feel that our customers see us as part of their team. We’re not just people who sell industrial gases and supplies. We are here to help our customers be more efficient and cost-effective and help them get product out the door. That’s very satisfying.”
This article originally appeared in the Fall 2013 issue of Welding & Gases Today. Copyright © Data Key Communications. All rights reserved.