By T.J. Prieur
In the middle of a recession, Paul Levitt, the current CEO of Chesapeake Office Supply in Chesapeake, found himself unemployed.
It was Sept. 1991, and his one-year contract as the head of Haynes Furniture had not been renewed. Though he chuckles now as he recalls how much he just didn’t get along with the then-CEO of Haynes, at the time, he was in a difficult position.
“Here I am,” Levitt recalls, “just moved my family, nice big house, put in a pool and a fence and a play yard on a six-figure income that just disappeared.”
“I thought, ‘What am I going to do? How am I going to replace this income?’” Levitt says. Eventually, he decided he would buy his own business.
With the help of a business broker, he says, “I found this little office supply company that was kind of the right price, and I thought, you know, ‘What the heck?’”
He sold the BMW he recently purchased, combined that with the rest of his capital, borrowed money from family and friends, and took out a home equity loan.
The company he purchased? Chesapeake Office Supply. At the time, it had four employees, two sales people, a truck driver and an accounts receivable clerk. It was doing about $70,000 in business a year.
That was almost 20 years ago. Now, Levitt’s company makes between $4.5 million and $5.5 million a year and employs anywhere from 14 to 18 people.
“It’s a very competitive business,” because of what they sell, he explains. “Our catalog has 38,000 items in it, everything from what you would expect—paper clips and scotch tape, rubber bands and paper and pens, to toilet bowl cleaners, picture frames, furniture, vacuum cleaners, microwaves—the gamut of whatever a business might use for its break room, for its janitorial supplies, for its IT supplies.”
The problem with selling these particular consumables is that they are also sold in many different outlets in every community.
“A lot of times,” according to Levitt, “the person responsible for making the choice of where to buy their supplies will show their good senses to their boss by proving how they’ve saved 13 cents on a dozen legal pads by switching to another supplier.”
This practice, he says, “is really bad business all the way around, because the cost of acquisition of any consumable for a company is about 150 percent of what the consumables cost.”
So, Levitt asks, how do small, independently owned companies such as Chesapeake Office Supply stay in business selling against billion-dollar companies such as Office Depot and OfficeMax and Staples?
“It’s not volume,” he answers. “This is what I tell my customers and my salespeople at the same time: We’re not in the business of supplying commodities. We’re in the business of supplying service.”
Chesapeake Office Supply makes the unprofitable consumables acquisition as cost-effective and painless as possible, Levitt explains, from ordering supplies, invoicing, shipping and receiving.
“Are we always the least expensive for every item that you buy? No,” he says. “And the dirty secret that nobody wants to let out is neither is Staples and neither is Office Depot and neither is OfficeMax. Nobody is, because we all have to make a profit to operate. This stuff basically costs the same for everybody, give or take. It’s really the process that we provide that is most important for our customers.”
In an industry that is oversupplied, Levitt asserts that his company’s value is as a resource for its customers.
While big-box businesses may be cost effective, he says, their customer service departments aren’t user friendly. Levitt insists that turning to independent vendors is the only viable solution.
“We’re a local, friendly, talk to the same person every time you want to for years resource that takes the problem off of your desk and puts it on ours,” he says.
