Brothers’ Action Plan Brings New Life to Family Business

Brothers Chris, Mitch, and Mike Caywood grew up surrounded by the energy business in Hudson, Mich., a community about 90 miles west of Detroit and 10 miles north of the Ohio border. Locals have dubbed Hudson as “a small town with a big heart.” The brothers’ parents, Jim and Dolores Caywood, owned and operated retail gasoline stations, bulk fueloil distributorships, wholesale petroleum distribution businesses, and a propane business. These enterprises were built vertically and merged in the 1940s by their grandparents, Richard and Dorothy Varner. They, in turn, used a gasoline and fueloil operation launched by Richard’s brother on the site of an old blacksmith shop in the 1930s as a springboard for their operations. Ultimately, the merged businesses became Caywood Propane Gas Inc. Generally, the boys had limited exposure to the family business growing up. Instead — and by their parents’ design — they played football, basketball, baseball, and other sports and spent many hours hunting and fishing with friends on the family farm. To this day, the brothers say they feel like they lived a carefree life similar to Mark Twain’s Tom Sawyer, but without the drama.

As Chris and Mike tell it (pictured here left to right), their parents’ goal was to push their sons to become first-generation college graduates and pursue careers outside of the business. Jim and Dolores must have pushed pretty hard. Chris earned bachelor’s, master’s, and law degrees from the University of Michigan and an MBA from the University of Chicago. Mitch earned bachelor’s and master’s degrees in business from Michigan State University, and Mike graduated from the University of Michigan with a bachelor’s degree, and then went on to earn a law degree at the University of Iowa.

All three pursued successful careers far away from Caywood Propane Inc. After practicing law for nearly nine years with the international law firms Nixon Peabody and McDermott, Will & Emery, Chris assumed roles with increasing responsibility at nationally recognized firms such as Sears, Baxter, Motorola, Kaplan, and DeVry. Mitch took on a number of roles in the automotive industry, including with General Motors and Chrysler, and Mike worked at large Phoenix- and Chicago-based law firms and at the Securities and Exchange Commission before seeking a more balanced work approach at his own HaasCaywood PC firm in Sturgis, Mich.

Sadly, much changed in 1997. Jim Caywood passed away suddenly at the age of 56, leaving his sons the family propane and fueloil businesses. What has transpired from 1997 through 2013 is what Chris and Mike Caywood today charitably characterize as a period of “benign neglect.” Over those 16 years, business performance declined dramatically, the family exited the petroleum business, and Mitch sold his interest to his brothers.

By 2013 it was apparent to Chris and Mike that Caywood Propane ultimately was going to fail unless something was done. They both quickly agreed that they needed to take more active control of the business and also agreed on a plan of action based on their experience with a combination of family-owned, small, mid-size, large, and Fortune 100 companies and firms.

Within the first few months of 2013, Chris and Mike came up with a plan of action. From their point of view, the plan amounted to a turn-around effort, though the business was not in immediate danger, had been around since the 1930s, and they had capital to invest. And like any turn-around, immediate steps were easy to identify, but hard to implement.

In order to devote attention to the business, Chris would step away from his role at DeVry to devote more time to the business. This was not an easy decision — he was managing an operation with nearly 2000 employees. Among his new initiatives: change the marketing focus. Caywood Propane had traditionally limited itself to advertising in only local print media. Chris’s experience with his marketing teams at Kaplan and DeVry had taught him the importance of appropriately combining traditional and digital media. As a result, Caywood Propane would launch a website in 2013; commence digital marketing operations; drive print-media traffic to the website; and reduce expenditures on traditional print media.

He would also change the marketing message. Chris and Mike had discussions with Caywood Propane employees to determine competitive marketing messages. The answers were straightforward. Found was that more than 80% of propane retailer websites and traditional media advertising focused on variations of “great service” and “great prices.” Not surprisingly, the Caywood Propane team found no competing retailers promoting their lousy service and high prices. The bottom line — there was no differentiation among competitor claims of great service and great prices. The difference setting Caywood Propane apart was to be:

Caywood Propane is part of a family business tradition that has been around since the 1930s. More important to today’s customers, the business did not run out of propane during the great shortage of January 2014. Many retailers are unable to make either of these claims.

Caywood Propane launched a website with published terms and prices. The site also publishes periodic blogs, safety information, information about employees, and advice. Few retailers publish prices or terms on their websites, or anywhere else.

Caywood Propane has consistently charged prices well below the average of prices charged by other Michigan retailers. Not the lowest price, just consistently below the average, and for almost 25 years. Maintained is that few retailers can document or make that claim. The company is unaware of any other retailers who have published such information on their website.

Chris and Mike worked with the Caywood Propane office team to review and evaluate software options. They consequently evaluated a number of software solution providers and ultimately implemented a solution that involves digital meters on the bobtails, tablets for all bobtails and service trucks, and comprehensive software that allowed data back to 1998 to be migrated into the new software.

Chris and Mike worked with their team to digitize their operations as much as possible. That involved, “if it’s on paper, can we put it in digital format?” This move has made finding documents much more efficient and improved customer service. Having extensive telephone conversation notes and copies of contracts and gas checks in the digital customer record has dramatically improved first-call resolution.

Chris and Mike quickly discovered that their business did not follow well-established mid-size, large-size, and publicly traded business practices and processes. As a result, Caywood implemented a general ledger system that downloads all transactions from banks and credit card companies, accommodates attachment of receipts to all general ledger entries, and integrates with the payroll processor, customer management system, and tax return software.

Caywood Propane created, revised, or otherwise ensured compliance with appropriate business and regulatory requirements, including, but not limited to, safety policy; the employee handbook; employee technology, privacy, and social media policy; the fire safety analyses for each plant; the emergency response plan; standard terms and conditions; website terms of use, privacy policy, and security; and various customer agreements.

The brothers concluded that general documentation that provides details regarding the operation of the business — down to the checklist or calendar timeline level — would enhance both business performance and compliance. To that end they have implemented a number of documentation changes to ensure that regulators are satisfied that tasks are completed but, equally as important, that business processes are completed safely and efficiently.

Caywood Propane believes that it has been blessed with talented and hardworking teams. However, any business evaluating turnaround activities needs to be prepared to manage issues. Some employees may be unable, or unwilling, to change. Similarly, they may be unable to execute the change even if they are willing. However, they also have found employees who are willing to work with them on executing a growth strategy. As Mike Caywood said, “We think it’s important to make sure employees realize that compensation, whether it be cash, healthcare, or retirement benefits are important to our strategy. We want to make sure that they understand that there are benefits that they share with growth and scale.” Safety and training also are important. Every employee, regardless of role, has a minimum of a CETP certification and DOT Hazmat certification. All employees participate in frequent safety training sessions conducted by a qualified outside third party.

Chris and Mike created an action plan based on years of experience working with large, sophisticated retail, healthcare, and higher education enterprises, but they had a lot to learn about the propane industry. They have relied heavily on third-party advisors and have learned a lot from other propane retailers through participation in benchmarking groups, including those sponsored by NPGA. Both men believe that other propane retailers — and the propane industry as a whole — would benefit from working with outside advisors.

Since the brothers took control a little over two and a half years ago, Caywood Propane has tripled its geographic footprint with new plants in Coldwater and Albion, Mich., in addition to Hudson, and has dramatically grown its business. The Albion plant includes a state-of-the-art autogas operation on Interstate 94 between Detroit and Chicago that Chris and Mike are anxious to grow. They also continue to evaluate additional expansion plans, potentially even including acquisitions.

For Chris and Mike Caywood, however, there’s something more important than the cold numbers of growth and performance. It’s a philosophy and a way of doing things. As Chris noted, “We run this business like business professionals. Making money for your family is the prerequisite for any business but, more deeply than that, there is a right and wrong way to do it.”

What’s involved? “Documented systems and processes, engaged and well-compensated employees who have a real say in operations, serious attentiveness to safety and regulatory requirements and documentation, a true separation between an owner’s personal and business expenses, active engagement in industry associations with competitors, vendors and partners. All of this matters. A lot. Living these values day to day in a manner that is professional and respectful to all of the players we come into contact with is important to us.” —Pat Thornton