It was on the day that Mike Agugliaro’s first child was born that he finally decided something had to change. He’d been running Gold Medal Service in East Brunswick, N.J., with his partner, Rob Zadotti, for a decade. All things considered, business was booming. Between industrial plant jobs and residential construction, work kept them busy six and sometimes seven days a week. This was good from a financial perspective, but even with a handful of employees to help shoulder the burden, they were both in danger of burning out.
“I went home the night my son was born to get his room ready, and I was bawling my eyes out — I was turning into my father,” says Agugliaro. “I was working a million hours a week, and I thought to myself, ‘I can’t turn into my dad. I need to be home to see my kid grow up.’”
What he needed, he knew, was to find a way to make the same amount of money while working less. He needed to work smarter.
The solution, as it turns out, was right in front of him — or, to be more precise, a couple hours up the road. This was the early 2000s, when not only were profit margins on industrial and commercial jobs thinning considerably, but the work itself was also drying up. But residential work — which up to that point accounted for about 40% of Gold Medal’s revenue — was abundant. The question then was how to shift the business model to primarily residential service and corner the market in their area. After inquiring about joining Contractors 2000 (which shortly thereafter changed its name to Nexstar), Agugliaro and Zadotti visited one of the best practices organization’s members in Pennsylvania. “It was the most impressive company I’d ever seen,” Agugliaro says now.
There in the parking lot sat a fleet of 20 trucks, one for every electrician on staff — which, compared to the skeleton crew at Gold Medal, seemed like an army. Even better, the company ran almost exclusively service calls, so it wasn’t beholden to ebbs and flows of the construction industry. No matter what was going on with the economy, there would always be homeowners who needed a light switch fixed, can lights installed, or a service panel updated. Agugliaro and Zadotti drove home that same day, having already decided to join Contractors 2000, and within weeks they were implementing the organization’s systems for streamlining their business practices.
While Zadotti studied the accounting materials they received, Agugliaro took the marketing and customer service beat. He ordered pizza and had his employees stay after work to learn the basics of professionalism: Use the sidewalk instead of traipsing across a client’s yard; knock on the door instead of ringing the door bell (door bells drive dogs crazy and wake up babies); wear uniforms and be presentable at all times. “It seems like common sense,” says Agugliaro. “But what is it they say? ‘Common sense isn’t so common.’”
Then a funny thing happened: In the first year after Agugliaro’s epiphany, the company flipped its work ratio, doing 70% residential and 30% commercial. Not only that, annual revenues jumped from $1 million to $2.3 million. But they weren’t done changing just yet. In the process of building out the service operation, Gold Medal’s owners discovered that they hadn’t necessarily learned how to be better electricians; their success came from the way they served the customer. And if that was the case, why couldn’t they expand to offer plumbing and HVAC services? “That,” Agugliaro says, “is when things really started to take off.”
It starts with delegation
“Not everyone can operate a multi-concept service business,” says Dina Dwyer-Owens, chairwoman and CEO of the Dwyer Group, a Waco, Texas, holding group for seven service-based franchise businesses, including Mr. Electric, Mr. Rooter, and Aire Serv. “For starters, you have to be running a strong brand to begin with before you even consider expanding.”
Early on in the company’s 30-plus history, Dwyer-Owens says it would award multiple franchises to one owner without giving it much thought. “But we quickly learned that if you don’t have the proper working capital — and you don’t have the proper second-level management — you can get in trouble,” she says. “As a result, that first brand that was doing well under your leadership ends up suffering if you don’t have that second-level management in place to continue to run that brand while you’re building a second or third brand.”
Today, the Dwyer Group has nearly 1,700 franchisees, but only 20 of them operate businesses in multiple trades. “It takes a really special individual, from our perspective, to manage multiple brands,” she says.
One of those individuals is Matt Hickman, owner and president of Kean’s Pump Shop in St. John’s, Newfoundland, Canada. Hickman had been working in water infrastructure — “pumps, water treatment systems, and that sort of thing,” he says — when he learned that the original owners of Kean’s were in the market to sell. He snatched it up in 2004, and, within two years, he was looking to expand into other trades, particularly on the service side. Like Agugliaro at Gold Medal, he was tired of swimming upstream in the commercial and industrial industries, trying to make do on small profit margins — even on $250,000 pump house upgrades. “You have to pick up a lot of $400 service tickets to make up for not doing a quarter-million-dollar commercial project,” he says, “but at the same time, there’s more of that work to go around — and more of the revenue drops to the bottom line.”
By his own admission, Hickman isn’t a technical guy. He’s a business owner, and while that might seem like a hindrance when trying to operate a technical business, he doesn’t see it that way. In fact, he believes it’s what made it easier for him to begin offering electric, plumbing, and HVAC services — through Mr. Electric, Mr. Rooter, and Aire Serv franchises, respectively. “If you wanted to open a doily shop, and you know how to make doilies, I’m pretty sure I could run a pretty good doily shop,” he says.
By treating his stable of franchises as businesses first and trade-specific service providers second, Hickman has been able to pull back and manage them with an eye toward streamlining processes and maximizing profits, while delegating the technical aspects to second-level management within each franchise. The trick, he says, is finding those people to whom you’re comfortable delegating the work.
“It really starts with personal values and ethics,” says Hickman. “Obviously you’re looking for people who have the technical skills you lack — whether you’re like me and have no technical skills at all or you have an electrical background and you want to add plumbing to your portfolio — but the way they do business has to line up with your vision.”
Because his company had years of experience installing water pumps, Hickman already had electricians on staff — all he really needed was a marketing framework and a system in place for delivering service. So when he was ready to expand into electrical service, it didn’t take him long to make the move to purchase a Mr. Electric franchise. Even if he hadn’t been awarded a franchise, he was prepared to build his own electrical business from the ground up, thanks in large part to an entrepreneurial electrician who already worked at Kean’s and was itching to launch an electrical arm of Hickman’s growing enterprise.
“So we probably would have gone forward anyway, because this was somebody I wanted to work with, somebody I knew I could trust, and somebody I knew had the technical skill set,” says Hickman. “Between the two of us, we had the pieces of the puzzle.”
That was almost a year ago. Today, with electrical, HVAC, plumbing, and pump installation operations, revenue has increased 30%.
“That isn’t a lot when you consider all of the different things we’ve added, but we’ve gotten rid of low-margin business and picked up a lot of high-margin business,” says Hickman. “So our revenue growth is there, and it’s moderate, but the margin growth is much better. What we’ve been able to do is grow our bottom line.”
The one-stop shop
If not for Target, Mike Agugliaro of Gold Medal Service might never have expanded beyond electrical service. It may sound strange, but it’s not once you think about it: Walk into a department store like Target, and there’s not much you can’t find these days. Groceries? Aisles 10 through 20. Clothes? Yep, other side of the store. Electronics? Check the back of the store, where an entire wall is covered in flatscreen TVs. So if they can offer a one-stop shopping experience, why can’t a residential service company?
“I looked around and thought, What other trades do our customers look for?” says Agugliaro. “Say one of my customers is going to redo their kitchen. They may love the electrical work I do, but if they can find a company that does plumbing, heating, air, and electric, why wouldn’t they use that company?”
Energized — not to mention heartened — by the success they’d had in transitioning to service work, Agugliaro and Zadotti approached the owner of a local plumbing and HVAC company to discuss an equal partnership. If that sounds easy, it was. But integrating the two companies was another matter entirely.
“Plumbers are a wild breed, and electricians are very detailed, systematic people,” says Agugliaro. “We had all of these guys in the same building, and it became apparent that we needed to create fundamental procedures on how people need to look, how they need to act, and what they need to wear.”
Then there were the fights at the coffee pot over who everyone worked for. The electricians technically worked for Gold Medal Service, and the plumbers and HVAC techs technically worked for Yatrofsky Plumbing, the name of the company they’d partnered with. But then there was Brunswick Service Group, the umbrella company everyone worked for. Eventually, for the sake of simplicity and harmony at the coffee pot, everything became Gold Medal Service.
Minor conflicts aside, the partnership opened new opportunities almost immediately. If an electrician showed up to install a dimmer switch and saw some water damage near the service panel, he could not only alert the homeowner, but also recommend a plumber from his own company to do the work.
“So say we needed 500 customers a year to make the amount of money we wanted,” says Agugliaro. “Now I only needed 100 customers because they might buy one of each thing we provide.”
But having service technicians who could spot problems outside of their areas of expertise meant cross-training employees on all of the services Gold Medal provides. So while Agugliaro is aware of the possibility that homeowners could perceive his company as a jack of all trades and master of none, his technicians are capable of handling the vast majority of issues they could encounter in a house (which, not for nothing, cuts overhead by making it possible to reduce staff). For the most difficult jobs, though, he does have licensed electricians and plumbers on hand. He likens his service techs to family practitioners who can set bones and treat sore throats and “his ‘experts’ to the heart surgeons.”
Today — just a decade after making the switch to residential service — Gold Medal has expanded to plumbing, HVAC, sewer and drain cleaning, and generators, pulling down annual revenues of nearly $23 million. They’ve come so far, in fact, that Agugliaro and Zadotti don’t even have offices in the Gold Medal building anymore. They spend most of their time teaching other contractors how to follow the path they started paving 10 years ago. In other words, they’ve come a long way from working seven-day weeks of nothing but physical labor. Like Matt Hickman of Kean’s Pump Shop, Agugliaro says it’s all a state of mind.
“As long as you think of yourself as just an electrician, your company will always be an electrical company,” he says. “But the minute you change your mind and say, ‘I’m a business owner. I do residential service work or commercial service work that includes electrical work,’ everything changes.”
Halverson is a freelance writer based in Seattle. He can be reached at [email protected].
