There was much woot-wooting, woo-hooing, and hooraying going on inside the American Airlines Center this past summer. But it had nothing to do with a tall, lanky German and his devastating, step-back jump shot. No, this hullabaloo had to do with two guys in button-down shirts and pleated slacks.
As 10,000 people looked on, giant flatscreens displayed images of these two casually dressed guys walking in slow motion through a glass-walled office. A voiceover boomed: “It’s the dawn of a new day. The rise of something big, something spectacular. For all across this country of ours, people sense the gleam of opportunity just beyond the glimmering horizon.”
The two men onscreen stopped and struck a pose. One put his hands on his hips, Superman-style. The other stuck his hands in his pants pockets. The video faded out and the same two guys—now in suits—appeared onstage to the announcement, “Ladies and gentlemen, the men who sparked the Ambit revolution: Jere Thompson Jr. and Chris Chambless.”
And the crowd went wild.
That’s what it’s like to be at the helm of one of the fastest-growing private companies in America. Thompson and Chambless are the co-founders of Dallas-based Ambit Energy, a billion-dollar-plus company that sells residential and commercial electricity service and natural gas in 13 states and the District of Columbia through multilevel marketing, or direct sales. Ambit is a sort of Mary Kay Inc. of energy. Like Mary Kay, whose conference draws 30,000 part-time salespeople to Dallas each year, Ambit now brings throngs of its 210,000 so-called “independent sales consultants” to Dallas for an annual event it calls Ambition.
That’s where Thompson and Chambless took the stage in the AAC last August. They awarded yellow jackets to top earners—consultants who have brought in $1 million or more in business—and they, along with the crowd of 10,000, celebrated “yet another” year of record revenue.
Ambit took just seven years to go from a single customer—Thompson himself—to more than 1 million customers and more than $1 billion in annual revenue. No other multilevel marketing firm has hit the $1 billion mark faster. In fact, in 2010, Inc. magazine named Ambit the fastest-growing private company in the country. And although it has fallen in Inc.’s rankings since then, Ambit is still growing its revenues by more than 20 percent a year. It’s now the 12th largest multilevel marketing firm in the world.
All of that certainly explains the reason for all that woot-wooting, woo-hooing, and hooraying at the AAC last summer. But it doesn’t quite explain just how Chambless, the 45-year-old former head of marketing for Excel Communications, also a multilevel marketing firm, and Thompson Jr., the 57-year-old former head of telecom firm CapRock Communications and a grandson of Joe C. Thompson, the founder of Dallas-based 7-Eleven, managed to pull off Ambit’s rapid, unprecedented growth.
One of the ways they did it: By imbuing the business with the same kind of slow-motion swagger that was on display on the flatscreens in the AAC. Ask Thompson today if he thought the company would be this big this fast, and he’ll tell you he never had a doubt. “We were pretty confident right from the beginning that this was a billion-dollar opportunity if we just did it right,” Thompson says.
To achieve those record results, to build that billion-dollar brand in record time, Ambit did many things right. But three of those things were especially important to driving the company forward. These three:
1. Being Who You Want to Be, Even if They Laugh at You
Most executives will live out their entire careers never having received the adoration of thousands of cheering people. The exceptions include team owners in professional sports and the top leaders of multilevel marketing firms, which have long made much ado about celebrating sales numbers in front of passionate and often paying crowds.
It’s the kind of thing that could easily go to your head. As one Dallas-based multilevel marketing executive I talked to put it, rather obtusely, “Most major multilevel marketing field leaders grow huge egos due to the veneration that their organizational downlines heap forth.”
So you’d be forgiven for wondering whether Thompson and Chambless are insufferable egomaniacs. After all, their company generates nearly one-half the revenue that $3 billion Mary Kay Inc. does, but with a much smaller salesforce—210,000 at Ambit compared to Mary Kay’s 2.4 million. But there’s something keeping the egos in check at Ambit’s headquarters in the 101-year-old Landmark Center in the West End: the cheap desks they bought back in 2006. Actually, they’re not even desks, but tables—the fold-out kind you set up to hold snacks for a party in the conference room.
“It’s really hard,” Chambless says, “even with [more than a billion dollars] in revenue, to get too full of yourself when you come in here every morning and sit down at a $19 fold-out table.”
Some of Ambit’s 650 full-time employees who work in the hardwood-floored space in the West End or in an office in Plano, do have actual desks. But the executive suite is an open-plan space where the top brass sit side-by-side. This was by design. “We wanted to be within earshot of each other,” Thompson says. “We have a thousand conversations a day without ever getting out of our desks. And, the open plan lets you plug into the emotions of the business. You hear when people are stressed or when there’s something we need to fix and you hear it when there’s a time to applaud.”
But the $19 tables and the open plan weren’t just about function. They were also about sending a message, right from the beginning of the company through today. “We wouldn’t trade the fold-out tables now for anything,” says Thompson, whose personal fold-out table has begun to wear thin where he keeps his computer’s mouse. “They made a statement about our priorities: We put our capital into systems and into people, not into fancy or elegant furniture that’s just there to create a façade of success.”
Those systems he’s talking about are as important to Ambit’s success as anything else the company has done. Ambit spent months and several million dollars building a proprietary information technology system that could handle the rapid expansion the company expected.
The system had to keep track of tens of thousands of new customers who would, hopefully, be signed up by thousands of different salespeople who would sign on to work on Ambit’s behalf—all of those part-time, Mary Kay-style consultants. Customers would need to be switched from their incumbent electricity provider to Ambit. Then, as they used electricity throughout any given month, Ambit would have to bill them for it, collect the payments, keep its portion, and send a small percentage back to the consultants who had brought in the business.
If the system crashed, if bills were error-ridden, or if consultants didn’t get paid, Ambit’s entire business would be in jeopardy. “Ambit consultants are a volunteer army,” Thompson says. “They’ll get all excited, but if you don’t deliver, you’re done. They’ll give you one chance. If you disappoint them or a family member or a friend they’ve brought in, they’ll quit on you.”
A couple years into the business, it was clear to Ambit that its systems were working and the consultants were not quitting on them. Then, as now, the company says 85 percent of all of its phone calls are answered by a U.S.-based operator in less than 30 seconds, and that almost all of its bills are accurate and on time. It also provides Web-based tools that give its consultants constant training through written tutorials, videos, a podcast, and data on their local markets.
“We have always looked at our business really as a data-processing company,” Chambless says. “Yes, we sold electricity and we used direct selling to acquire customers, but at our core we were a software company, and we knew that to be really good at what we wanted to do, it was all about how we handled data, how we processed the data, how quickly we shared data with the market participants we were dealing with to build customers and collect our money.” But while a data-first perspective made sense to Ambit, it confused more than a few people in the energy business. In 2008, Thompson found that out when he made a presentation at an energy conference in Austin. “I stood up on stage and said, ‘We’re not an energy company, we’re a data-processing company,’” he recalls. “There were snickers out there. People just thought, ‘These guys don’t even know what they’re doing.’”
To Thompson, that was a sign of success. Ambit was four years old before it hired someone who had worked in the electric utility business. Many top employees had come from Excel or from other telecommunications companies. “We didn’t want to think like energy companies,” Thompson says. “If we needed to know something about the energy business, we just Googled it. Because ultimately it was the focus on systems and data that fundamentally set us apart from an operating perspective. And that is a crown jewel in the business today.”
2. Getting Your Story and Your Slogans Straight
Jere Thompson Jr.’s grandfather, Joe C. “Jodie” Thompson, helped found 7-Eleven in 1927, converting old ice houses into places that could sell food items and drinks that needed to be kept cold. A now-giant convenience store chain grew out of that simple idea. It’s a great story. You should probably look it up if you don’t know it.
Thompson not only knows it, not only lived it for a while as an executive in his family’s investment firm, but he also learned from it. He learned that companies need to tell stories about themselves, stories that help customers and workers better connect with the enterprise.
The focus now is to revamp those high-dollar, homemade technology systems so
Look up Ambit’s website and you’ll find that the company cleverly spins tales of its days of yore, even though those days happened just eight years ago. “It started with a sandwich,” begins the story of Ambit’s creation. The tale continues something like this: In the spring of 2006, Jere and Chris, who don’t know each other, meet in a Potbelly sandwich shop for lunch on a Friday afternoon. They talk about taking a multilevel marketing approach to the retail energy business. Chris is the chief marketing officer at Excel, where he was one of the first to be hired, or “Employee 52,” as he says. Jere is the former CEO of CapRock Communications, a telecom firm he founded in 1993 and grew to $300 million in annual sales before selling.
Ambit can handle the next ramp-up in business.
The focus now is to revamp those high-dollar, homemade technology systems so
After lunch, the men consider their partnership. The next Tuesday they make a deal, and sketch out the business plan in front of a whiteboard. Thus Ambit begins.
There is, of course, a little more to it. For one thing, Ambit already existed. After selling a troubled CapRock to McLeodUSA for $532 million, most of which was debt, Thompson had started a company called BlueVista in 2005. He’d personally filled out an application to sell electric power on the retail market in Texas, which had deregulated its energy market in 2002.
By the time Thompson met with Chambless, he not only had the okay from the Texas Public Utility Commission to start selling power, he was already setting up the technological infrastructure to do so. The thing Thompson didn’t have, though, was the means by which he was going to sell that energy—multilevel marketing, or Chambless’ area of expertise. And the trouble was, he wasn’t entirely sure he wanted to use direct sales for his company.
“The biggest uncertainty that hung over me was that I’d never been in direct sales before,” Thompson told me. In 2010, when Ambit made the cover of Inc., he told that magazine something more direct: “I admit that I did have some concerns about using direct sales and multilevel marketing. Chris and I were concerned about our reputations. We didn’t want to wake up in five years with a big company but feel embarrassed about how we did it.”
But there was a good reason for selling retail electric power using multilevel marketing. The reason was called Stream Energy. That Dallas company was the first to apply multilevel marketing—long the provenance of Mary Kay and Herbalife and other consumer product sellers—to the retail energy sector. Stream was founded in 2004 and hit $80 million in sales in just 10 months—a pace so fast that Stream was publicly projecting itself to be on track to hit $1 billion in sales in just three years. (That didn’t happen, but Stream, through its Ignite subsidiary, is now a billion-dollar company, by revenue.)
The fact that someone had already created a roadmap—the only roadmap—to direct sales success in retail energy is not part of the official, “It started over a sandwich” story for Ambit. Indeed, during an hour-long interview, neither Thompson nor Chambless will utter the words “Stream Energy” no matter how many times I mention it to them. Still, Thompson and Chambless acknowledge that the presence of a “competitor” did inform their initial business strategy. “We started … in the shadow of a competitor that had a great start,” Chambless says. “We knew it was going to be difficult because we were going to be constantly compared to them. So Jere and I talked about, ‘How did Lowes come in and compete with Home Depot? How did Target come in and compete with Walmart? How did Southwest compete with American Airlines? How does a second entrant into the marketplace prepare to go out and get market share?’ We had to really be committed to doing everything we do that compares favorably.”
In other words, Ambit wouldn’t just position itself as a direct sales company that sold electricity. It would position itself as “the finest, most respected, retail energy provider in America.” That slogan now hangs on the wall, in silver, block letters, inside Ambit’s headquarters. “That’s really what set the trajectory,” Thompson says. “But it was a big statement for a company with only two customers at the time.” Still, Ambit didn’t get off to the “finest” start. The company almost immediately engaged in a legal battle with Stream. Ambit said Stream was interfering with its plans to buy energy on the wholesale market. Stream said Ambit had copied some of its marketing materials. After many legal filings, Thompson eventually said an internal investigation had revealed Stream was right, at least about a couple of documents. So he sent a letter of apology to Stream. But guess what? Rob Snyder, the co-founder and chairman of Stream Energy, says that turnabout is fair play. “While Jere and Chris aped our business model, we, in turn, over the past two years, have adopted a few tactical innovations that Ambit itself has brought to the market,” Snyder says.
There’s another meaningful statement in silver, block letters on Ambit’s brick wall. It came from an executive at Mary Kay whom Thompson asked to allay his fears about the perception of the direct selling industry. “He told me, ‘Never sacrifice integrity for growth,’” Thompson says.
One practical application of that message came just after Ambit entered the New York market as part of its rapid expansion in the northeast, where most of its consultants are based.
Soon after it booted up business in the Empire State, Ambit started to receive complaints from new customers who said they never signed on with Ambit. It tracked those customers through its computer database and tied them back to a couple of new consultants who were apparently using less-than-honest tactics to build their business. Ambit cut ties immediately with those consultants and apologized to regulators in New York State as well as to ConEdison, whose customers had unknowingly been switched over to Ambit.
“Jere and I had a conversation about what we could do after that,” Chambless says. “We literally looked at the wall in the office and we said, ‘What does the finest, most respected company do now?’ So we decided to send an email out to all of our consultants, telling them what happened and what we’d done about it. We reminded them that we weren’t going to sacrifice our integrity for growth, and we weren’t going to let them do it either.”
Since then, Ambit has run its operations in a way that seems slightly Big Brotherish, except with the intent of maximizing profits instead of quashing dissent, as in 1984. The company uses its technology to flag consultants—sometimes for praise, sometimes for further scrutiny—and it asks consultants to watch out for each other, making sure there are no exaggeration or any other shenanigans.
“If you join Ambit and you don’t want to do it the right way, you don’t last very long,” Chambless says. “And it doesn’t take Jere or I to find those people now. We have an army who love what we’re doing and love our company. They’ll police it.”
3. It’s Okay to Grow Slowly
There’s nothing easy about getting the technology in place to oversee an army of consultants. And yet, that army pays for the privilege, which seems like a good problem to have. After all, Ambit’s consultants pony up for the privilege of working for the company. And Ambit makes no computers, no makeup, no anything, really. Except deals.
Then again, those deals are highly complicated. Ambit buys energy in advance through massive, hedged purchases, all done through Coral Power, a Royal Dutch Shell subsidiary. That means the power Ambit sells is generated by someone else, transmitted to your home by someone else.
This is the same for all retail electricity providers, of course. But even though there are about 100 such providers in Texas, none are posting Ambit-esque numbers. Remember that slow-motion swagger? You’re about to get a little more of it. “We’re all selling the same products at roughly the same rates in all of the same markets,” Thompson says. “We’re all living in the same world. But no other company out there has come close to achieving the results we have achieved. Why? It’s our systems. It’s all about people, our ability to attract and retain those great people.”
Those people, the Ambit consultants anyway, sell the power Ambit buys at the wholesale rate, offering prices that are discounted from what incumbent providers charge. Thompson says Texans have gotten prices as much as 40 percent less than those charged by incumbent energy providers. In less competitive Washington, D.C., Ambit guarantees at least a 3 percent savings over the incumbent utility, Pepco.
For every customer they sign up, Ambit consultants get a small cut of the customer’s bill. If they sign up 15 customers or more, the consultants can get their own home power from Ambit for free. Most, though, have only five customers, Ambit says.
Brian McClure is the exception. He’s the top general in Ambit’s volunteer army. McClure, who was once a top seller for Excel Communications, has been with Ambit almost from the beginning and is now at the top level—or national level—of Ambit’s multilevel marketing platform. He recruited dozens of consultants who work at levels under him, and they in turn recruited dozens and dozens more until McClure’s ranks of consultants had swelled, he says, to nearly 200,000—or almost all of Ambit’s force of consultants. “My income is hundreds of thousands of dollars a month now,” McClure says, “and I think it will go to millions of dollars a month.”
McClure is one of just five Ambit consultants who bring in more than $5 million in annual business. Nearly two dozen more consultants bring in more than $1 million each. The secret to that success, McClure says, is partly due to all that technological infrastructure that Thompson and Chambless spent so much time and money to build. “If Jere and Chris didn’t take care of taking care of the customers and paying the consultants on time, it would be impossible to build the company,” McClure says. The other part of the success is that electricity and natural gas are, McClure says, the simplest products to sell using a multilevel marketing platform. After all, there are no elaborate instructional manuals required to flip a light switch or turn on the stove. Consumers don’t need to be “sold” electricity and natural gas because they already have it, need it, and use it every day. And once an Ambit consultant has convinced a customer to switch over to Ambit from their incumbent electricity provider, such as Oncor in Dallas, the consultant doesn’t need to do any more selling because the product never changes, unlike Herbalife, which is always rolling out new vitamins, or Mary Kay, which regularly reformulates its makeup. “There’s no question as to whether the consumer wants electricity and natural gas or not,” McClure says. “The only question is whether they want to choose Ambit Electricity as their provider. So it’s simple, but it is not easy.”
Perhaps that’s why, in a 2008 video called “The Methodology of Gathering Customers,” McClure offered a surprisingly harsh piece of advice for consultants. The video suggests consultants call their friends and ask for a favor. The favor being: Sign up with Ambit. But if that call ends without a sale, McClure says he’ll tell his own friends, “I’m not going to hold it against you as a friend for not being a customer … but what I am going to do is tell you that I’m out of the favor business. If you need some help in the future doing something, what I want you to do is call ConEd and they’ll come out and help you.”
Whether they employ that method or not, all Ambit consultants must pay Ambit Energy a one-time fee of $430 and a monthly fee of about $25 to maintain their own Ambit website. The fees paid by consultants give Ambit less than 2 percent of its revenue. The rest comes from the difference between what Ambit bought power for on the wholesale market and what it sold that power for to more than 1.3 million residential customers.
Ambit buys its electricity and natural gas before its customers ever turn on their stoves or air conditioners. It estimates how much energy its customers will require—down to specific days—and then buys all that energy in one-time contracts with Coral. When Ambit estimates correctly about the amount of power its customers will need, its profits spike. When it misses its estimates, it ends up buying extra power for a higher price. To get the hedges right, the company acts as its own Al Roker, forecasting the weather in advance for every day of the year. It doesn’t always work. One retail energy executive with knowledge of Ambit’s financials told me that Ambit and every other energy provider doing business in the northeast took a massive hit thanks to the so-called Polar Vortex, which kept the northeast unseasonably cold for most of last winter. That’s why he believes Ambit’s EBITDA for 2014 will likely be less than 1 percent of total revenue, or $15 million.
Ambit won’t discuss profit numbers, but the company does say it has cut back the pace of its growth. It expanded into Massachusetts, Connecticut, and northern California in 2012; into Delaware and Rhode Island in 2013; and into Virginia and New Hampshire in 2014. It also plans to add Maine in 2015.
However, Thompson says cutting back the pace of Ambit’s growth is intentional, and that it goes back to one of those slogans on the wall—the one about not sacrificing integrity for growth. Thompson says the company is still growing, although the number of consultants it works with has shrunk slightly. The focus for the moment, he says, is to revamp those high-dollar, homemade technology systems so Ambit can handle the next ramp-up in business, whenever that occurs.
“We had been growing at a remarkable pace, year over year,” he says. “I had to let people know that growing at 20 to 25 percent is not going to be a bad thing, either. Some years when natural gas prices come down, when electricity prices come down, you may still grow the base of business, but your revenues won’t grow commensurately.
Still, McClure, the top Ambit consultant, sees plenty of growth ahead. “We’re only in 13 states and there are 28 that are currently deregulated and more states looking at deregulating,” he says. “And we’ve got less than 3 percent market penetration in the states we’re in. So the potential of the company is in its infancy.”
With an infant, you can never quite be sure how they’re going to grow up or what they’re going to do. That’s more or less been Thompson’s approach to raising Ambit from its birth—and continues to be his approach now. “You can’t build for perfection,” he says. “You can’t build for where you’re going to be five years from now, especially when you’re starting from scratch. So you really have to understand going into it that this will take you a certain distance, but you’re going to have to circle back and fix it. That’s why we adopted the mantra of never let good enough be good enough.”