Forty years after Leonard Lee established Lee Valley Tools in Ottawa with three employees, the iconic Canadian firm has evolved into a household name among connoisseurs of expertly made hand tools.
While the company began with relatively modest ambitions, its early foray into international sales quickly led to a wise decision to work with HSBC, sparking a lasting relationship that has helped Lee Valley not only seamlessly conduct business across borders, but also address a variety of inevitable growing pains along the way.
Renowned for both the quality of its products and its outstanding customer service, Lee Valley now boasts 20 retail stores throughout Canada, a vast online customer base across North America and 1,000 employees.
Having cut his business teeth selling barrel-stove kits – the cast iron parts traditionally bolted onto a 45-gallon drum to make a wood stove – in 1978 Leonard Lee was ready for what he really wanted to do: sell woodworking tools.
Lee teamed up with American Garretson Wade Chinn whose company, Garrett Wade, was a mail order supplier of woodworking tools sourced from around the world. For a small stake in Lee Valley, Chinn provided mail order catalogue expertise and introductions to tool suppliers, giving Lee Valley a running start.
“The first catalogue we published made us look like we’d been in business for 25 years. Dad’s thought was the company could eventually employ as many as 20 or 25 people. Clearly, he was a bit off,” says Lee’s son and current Lee Valley Tools CEO, Robin Lee.
The company’s breakthrough came when it started differentiating itself from competitors by designing and manufacturing its own products based on customer feedback and requests for specific tools. Today, about 25 per cent of Lee Valley’s sales are from products it manufactures under the brand name Veritas Tools, which are exclusive to Lee Valley in Canada and available through other retailers internationally.
With market expansion beyond Canada came the need for financial services that matched Lee Valley’s growing cross-border business.
“We started working with HSBC because of its global profile,” says Lee. “Those were pre-Internet days and our products had different prices in different currencies depending on where our customers were. The financial transactions were difficult for us to handle. HSBC was well set up to handle international business. That was a key reason for choosing them.”
“It was a good move,” he adds, “one that has helped the company remain on track to meet its business objectives.”
It’s very important for us to have bankers who understand what we’re doing and who take an interest in us as a long-term customer. We feel that HSBC has done that. We’ve had a number of very good managers and VPs at the bank who have taken the time to check in with what we’re doing and to actually understand our business needs, says Lee.
By working closely with HSBC and educating the bank on the company’s manufacturing, mail order and supply chain operations, Lee Valley was able to address inherent pain points and position itself for growth.
For example, Lee points to the annual surge in demand in the lead up to Christmas, which can be a huge test for any retailer.
“With lead times of six to twelve months, or longer, it’s capital intensive, so our financing needs are considerable. We were growing rapidly in the early years – 50 to 60 per cent in some years. We were going back to the bank year after year and saying we are going to need 50 per cent more than we needed the year before. Because HSBC understood our business, and why we were growing so fast, it made it easier to get the support we needed,” he says.
Lee Valley’s continuing success depends on a relationship with its bankers that goes well beyond the company’s financing requirements, adds Lee.
As the company grows it also needs to consider key areas of the business such as financial planning, succession planning and networking.
We need advice on how to address tough challenges from people who have seen similar challenges before, Lee says.
Over the years, HSBC has focused less on selling products and services to Lee Valley and more on understanding the company’s needs and recommending solutions to meet them.
“They take a long-term view that maximizes the value of the relationship for both sides,” says Lee.
The expansion of Lee Valley’s export market to more than 90 countries has also brought complexities that require the services of a bank with a global reach.
“We need to be assured of seamless transactions whether we are dealing with customers in the UK or Australia,” says Lee. “As we move into new Asian markets – China is going to be very big for us – we need to know that we have a bank that can support us with people and services on the ground.”
While having a healthy long-term relationship with HSBC is comforting to Lee Valley, the company also knows the bank is constantly looking for ways to help with day-to-day challenges.
“Lately, it’s been around cash management, instituting electronic payments and international wire transfers, and increasing the security of payments. HSBC’s support with cash management has really benefited us, allowing us to ensure we’re getting payments out on time and getting best possible terms on all of our transactions,” says Lee.
Looking ahead, Lee says emerging markets and a growing interest in handcraft offer significant new opportunities for the company.
“While we have a very strong Internet presence, as a hand-tool company, the physicality of our product is important, so we are looking at significant retail expansion, including into the U.S. within a few years,” he adds.
Closer to home, Lee Valley has just expanded into Quebec with the opening of a retail outlet in Laval. The company will roll out a new web presence early next year with state-of-the-art software and content, which Lee expects to help drive the company forward in the coming years.
Change may be pushing Lee Valley towards its next growth spurt, but its relationship with HSBC remains constant, says Lee.
I could quote lots of facts and figures to show what HSBC does for us, but that wouldn’t illustrate the importance of relationship and connection, which makes banking just one less thing to worry about in running the business, Lee adds.
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