For nearly 40 years, Randy Lyne has owned and managed Preferred Pump & Equipment, which is one of the top distributors of water well pumps and equipment in North America. His humble beginnings came while working for a couple of different pump manufacturers in the Midwest, but he never felt aligned with either in terms of management direction. Looking to leave on good terms, Lyne approached his last boss and proposed working together to set up distribution somewhere in the country that would be beneficial to each of them.
“I took a chance and convinced them to move their warehouse to the big city of Dallas, Texas where they would pay half the rent and I would pay the other half,” he recalled. “That’s when I founded Preferred Pump & Equipment in 1982.”
Lyne packed his baelongings into a U-Haul and made the journey to Texas from Ohio. “That business had no cash and few resources,” he said. “But we were up and running—or at least walking. I didn’t know anyone in Texas, but I knew who I wanted to be, and those values were established early on.”
In fact, those exact values have carried Lyne and his company through the last four decades and into a future that no one predicted.
The Playbook for Success
Lyne spent some time in choosing Texas as his home base. “I knew I had to identify a place in the country that my previous employer needed distribution because it would serve as incentive for them to back me. I also knew that I had to pick an area that had a large enough available market need for domestic pumps,” he said.
Although Dallas was not his first choice, it was ultimately where he put the first pin on the map. Lyne put in the work early on to ensure success, but he wasn’t always sure it would work out. In fact, he lived and slept in the warehouse office for the first eight months. “I splurged on a health club membership, but only so I could shower,” he said. “I used to teletype my orders every single night and it took a long time to really build enough equity to be successful.”
Lyne chose the name Preferred Pump & Equipment because he recognized that as a wholesale distributor, he was selling the same exact products as his competition. “So, the goal from the beginning was to be the distributor that customers preferred.”
His desire to keep his customers’ needs at the forefront of decision making combined with his perseverance and grit has allowed Lyne to add an additional 54 pins to that map, growing far beyond what he originally sought to do.
Four Decades of Experience to Fill the Pages
When you ask for someone to reflect on their success and talk about the highlights, often you’ll hear about the big accomplishments. Very rarely do people reflect on parts of their success they perhaps don’t want to showcase.
“On paper,” Lyne recalled, “I was nowhere near credit-worthy, but industry friends took a gamble and extended me credit because we had a relationship. In fact, my very first loan was an accounts receivable loan from a company that lent to used car lots.” It took Lyne almost a year and half before he would qualify for a traditional line of credit loan from the banks. “That,” he said, “was a big deal!”
Another big deal for him was the ability to “let go”. He recalled back to when he went from having two locations to opening a third. “Up until that point I knew every single detail of the business. I knew what inventory we had, and I knew all the vendors and all the customers. I was involved in every decision, but with expansion comes the inherit need for delegation and at the time that wasn’t something I knew how to do. It was absolutely a highlight when you look at the timeline of our success that I opted to delegate and grow the business,” he stated. “It was a difficult decision at the time, but I’m happy I did it.”
Not everything is as methodical as making decisions to grow—whether financially or by footprint. Some highlights come in the form of chance. It’s the roots you sow when you don’t even realize you’re sowing them because at the end of the day they’re led by the principles and values in which you live your life. “I was approached by some gentlemen I worked with many years ago out in Minnesota,” he said. “They suggested I open a branch in Minnesota to which I responded, ‘Are you kidding me? I’m out in Texas, why would I go to Minnesota?’” It was the early relationship Lyne had established, showcasing his dedication, that led to this chance request. Moreover, this chance request led to a successful branch in Minnesota, which was profitable early on and the catalyst for continued growth and expansion for Preferred Pump & Equipment.
“When we first opened our doors in 1982, I thought we’d maybe grow to three to four branches,” Lyne said. “Today, we have 55.” Vision-wise, Lyne added, “I wanted to be the company every contractor preferred to buy from. I wanted to be as ethical and above board as I could be and ensure that our reputation would withstand time.” True to form, Lyne didn’t take all the credit for the company’s success. “I believe we have exceeded expectations for the vision I had because my contribution is being able to hire good people and letting them do what they do. That’s where our success comes from.”
Good People Help Make Good Decisions When Faced with Challenges
No matter how much a business leader prepares or plans for success, challenges will always present themselves. Whether you can overcome them ultimately comes down to first acknowledging that they are there, and second accepting that you alone don’t always have the right answers as to how to approach them. “Oftentimes my managers would present an idea that I may have adamantly disagreed with,” Lyne recalled. “But if they fought for it, I got out of their way and let them do it. Partly because I had to trust the people I hired, but also because even if they failed, they would learn something from it and come up with better ideas.”
Lyne often referred to Preferred Pump & Equipment as a family. Instilling that trust in his employees only furthered that belief. “Trust brings about loyalty,” he said. “We extend that belief to all our employees, our customers, and our vendors.”
As a cyclical business, Preferred Pump & Equipment relies on good weather to have a good year. “If it’s a real wet year,” Lyne said, “We’re going to have a bad financial year.” But even still, Lyne prided himself on never having to lay anyone off. “I was willing to not make any money myself in order to keep from having to let people go.” He modestly said it’s an advantage a smaller, privately held company has over larger corporations. But it was clear that the values in which he founded his company were shinning through his decision-making process. “The way I saw it was that I wasn’t worried about going out of business, but I also wasn’t worried about maximizing profitability. I just wanted to make it a good place for employees to want to work and find a long-term home.”
What started out on a wing and a prayer some 38 years ago has now transformed to a company with as many as 55 locations and 600 employees. Lyne recalled the early days when he was laser-focused on the water pump business. “I had to stay focused at that time because quite honestly we just didn’t have the capital not to be.”
As the company proved to be successful and expand little by little, one of his managers proposed expanding to the agricultural pump business. “This is an example of one of the ideas I was adamantly opposed to,” Lyne recalls. “I just didn’t think it was a good idea and I thought it would affect our main business.” The manager fought for the move and Lyne eventually agreed. “It’s been a very big part of our success today,” Lyne stated. “It’s at least 25% to 30% of our business and it’s because I gave in to him and his idea.”
Securing the Future by Giving Back
Lyne takes a lot of pride in his employees—who he always refers to as his family. At the beginning of 2020 during an all hands-on-deck meeting, he played a video for everyone to watch. The video starts off with a forthtelling message about the future of the company.
You can hear Lyne ask, “What’s next for you, the employees of Preferred Pump & Equipment?” He goes on to tell a story about the history and triumphs of the company as well as the goal moving forward. “Each one of you helped put us on the map,” he added. “So, I want each one of you to know about the next big chapter in our story together.”
Lyne had been the single owner of Preferred Pump for nearly all the years of its existence. He worked to keep the profits in the company by investing back into it all along the way. “At some point, maximizing profits is no longer the priority for a single owner,” he said. “The most important goal becomes leaving a good, safe, and successful place for employees to thrive and grow. Where people are treated fairly, enjoy coming to work, and can save for retirement.”
Lyne joked about the questions he more frequently heard floating around, including “Who’s gonna run the company when RL leaves? What happens to Preferred Pump when Randy retires? What if Randy sells out? What about when he dies?”
Responding directly to the retirement questions, Lyne said he had definitively given his retirement notice to his staff. “I will retire in 2048.” As for the other questions, he said he spent a lot of time thinking about what is best for the company in the long term. “I will not sell to someone or to some company looking to change the Preferred Pump culture,” he insisted. His heart was in finding a fit to ensure the company keeps going, but more importantly that the values in which he built remain as the foundation. “Finding the right person to take care of all the employees is the biggest business decision of my life,” he said.
In the video, Lyne said to employees, “I have to tell you that I have decided to sell Preferred Pump & Equipment. In fact, the company has already been sold. The sale was completed on Dec. 31, 2019. Let me tell you about the new company you now work for. They are good, hardworking, respectful, genuine, down-to-earth people.”
He goes on to tease, “Who are you working for now?” With some pause he finally answers, “Well, look today to your right. Or to your left. If you’re alone, you’re going to need to find a mirror, because YOU, my friends, are the new owners of Preferred Pump. As of Dec. 31, 2019, Preferred Pump is an ESOP—a 100% employee-owned company.
Making the Move to ESOP Was the Right Decision
Lyne explained that as he looked at all the different options for what to do with the company moving forward, he could not help but reflect on the fact that what made the company successful were the employees. “The more I learned about what an ESOP is the easier the decision became,” he said. “I knew that it would be the best bet for the future of the company as well as for everyone who works here.”
One of the things that posed a challenge was the fact that if a business sells 100% of the company to its employees, the survival of the company isn’t very high because the capital within the company has just been spent. “On paper, Lyne said, “some might say the new owners are nowhere near credit worthy. I remember how that feels.”
So, Lyne made the decision to lend back all the proceeds from the sale to Preferred Pump and subordinated the debt to its banking partners.
As of Jan. 1, 2020, any employee who had been on the payroll for all of 2019 was now part owner of Preferred Pump. Going forward, an employee is eligible to get company stock and become part owner once they have completed a full year of employment. If someone retires, then they need to cash out so that the company will always remain 100% employee owned. If that’s not incentive to work hard and remain profitable, I’m not sure what is.
“The morale of our employees, now owners, is even higher than it’s ever been before,” Lyne said. “They are vested in how the company is run and its growth going forward.”
Lyne mentioned earlier that he plans to retire when he is 100 years old, but until then, he plans to work right alongside his co-owners to make Preferred Pump the preferred distributor of all contractors. “We work harder than any of our competitors, but we’re also going to have more fun,” Lyne said.
Lyne wanted all of Preferred Pump’s customers and vendors to know that things are not going to change and that the values in which grounded this company some 40 years ago will remain the foothold of its future for years to come.
To all the owners of Preferred Pump & Equipment, cheers to your success. May it continue to pull you forward.