BUYER:“You must self-perform to be awarded this contract.”
ME:“We do sir, actually that is our value differentiator, we self-perform on an enterprise-level.”
BUYER:“I need to see serial numbers of the fleet you own, and I need references for projects of similar size that you self-perform on. I want to meet some of your field staff.”
ME:“Sure, I will print you a copy of our asset inventory, and you can speak with as many of my clients as you wish. I will bring all your site foremen for you to meet.”
BUYER:“If you can demonstrate this ability, the locations will be awarded to you, we are tired of companies that take the contract, and then sub-contract it to contractors who are not qualified. We are tired of the bait and switch.”
This was a conversation between me and a prospective client. The client reviewed our initial proposal and found it to be complete, but they had questions. To my delight, the questions only supported my entire approach to industrial snow removal services – self-performance is king.
The client rep, in this case, swas a veteran district manager to the US East Coast where storms ranging from freezing rain events to massive Nor’easters that can produce feet of snow and cripple logistics. And in this market, the word cripple and logistics are a no go.
A little about my company. I lead East Coast Facilities, one of the market’s most dynamic facility maintenance firms. We serve fortune 500 clients in multiple states on the East Coast of the United States. We offer best-in-class service, performed by one of the finest workforces ever fielded by our industry. In addition, we are a Certified Minority Business Enterprise.
We are champions of blue-collar workers, offering living wages, health care, and retirement benefits to our employees, which directly leads to sustainability and excellence. We self-perform our production and own and operate a vast fleet of professional equipment.
Our clients are commercial asset and portfolio managers with specific challenges and needs. Our client portfolio is robust, listing some of America’s largest corporations and most well-known CRE management companies.
The way I see them, snow removal companies break down into three categories or types from the strongest to the most vulnerable. This industry is changing, and this evolution influenced the business model when my company, East Coast Facilities, formed in 2015. And while my views and beliefs may ruffle some industry feathers, everyone must be in agreement that our platform and audience reach is substantial and growing every day.
And in the end, maybe you’ll agree I’m on to something.
There are many types of business models for the snow and ice industry, but for this purpose I have built only three master types – Brokers, Blenders, and Performers.
I am classifying brokers by two identifiers, either they are straight brokers who operate a paper company and virtually own zero snow removal assets, or they are a chameleon broker who has the appearance of being a self-performer by owning some assets as a front, but, they are completely dependent on sub-contractors to actually get production done. Some even lease snow removal equipment and then sub-lease it to sub-networks allowing the general public to perceive that they self-support these massive fleets when in reality they rely on others to contribute to the credit risk and staffing of seats. Brokers would implode in one snowstorm if their sub-contractors decided not to show up. I am not including third-party corporate facilities management organizations. These are not snow removal companies, but rather an extension of property management services.
Blenders are companies that plow snow and treat ice, therefore, they do a measure of self-performing, but in order to scale or add market share, they heavily rely on sub-contractors to assist them in their contractual fulfillment. Generally, the equipment and personnel that they have on hand come from other non-snow removal operations such as landscaping services. Once they expand past the foundation of this equipment and man-power that they have for these core services, they move to reliance on sub-contractors to deliver snow removal services to their clients. They do this to take advantage of the opportunity to scale their snow removal revenue by adding production bandwidth. If their sub-contractors across the board decided to stay home, the Blender style company would have to decide which clients were going to be sacrificed. Many locations would fail in this scenario.
The Performers are the companies who own and operate their own fleet and staff it accordingly. They self-perform services. Performers have experience in field production, and the firepower to get it done. Performers do not rely on sub-contractors, even if they only had a hand full of them, their immediate disappearance would be a mere blip on the radar for a Performer. Inherently a Blender is partially a Performer, just as most sub-contractors are also Performers.
From my perspective, there is a dramatic increase in Broker-style businesses. Twenty years ago there was just a handful, now there are more than probably most people even know about it. The Brokers serve a purpose, they consolidate spend for buyers, offer a single point of contact on large portfolio accounts, and manage risk and field production. The Brokers shine on large retail and banking portfolio contracts. They push down costs and rely on regional or local Performers to get the work done. Some Brokers are sophisticated and have proprietary software, large sub-contractor networks, and systems and process that oversee the work. Most Brokers are small players, who find it easier to manage sub-contractors vs buy, maintain, staff, and operate large fleets of equipment. When Brokers venture out of the place where they shine, they are vulnerable. They cannot deliver the quality and control as the other two business types can.
While the Broker business is trending up, the opposite is happening at the other end of the spectrum. The Performers are disappearing. There are very few large performers in the general market, and large enterprise-level self-performers are almost impossible to find regionally, let alone nationally. They are unicorns. There is not a single national self-performing snow removal company in the United States.
The largest segment of business styles by type is the Blenders. The blended style of business is the most popular. They are very effective when they are close to their core and have the potential to build strong personal relationships with sub-contractors. It is interesting to note that Brokers will engage Blenders, who engage sub-contractors, sometimes making fulfillment a three-layer system.
Prior to ECF, I operated a Blender company, it was very effective. But I could not control the people who worked for the subs. I could not directly train them or manage them. We could not drug test them or conduct criminal background checks. They did not embody our company culture. I also did not control the subcontractor’s fleet, its age, condition, or image. Blenders are much more effective than brokers, but they are not true self-performing companies.
Brokers have the least ultimate control making them the most vulnerable for failure and the least effective in commercial snow removal. This is especially true with large sensitive projects. The Blenders can be strong but remain partially vulnerable with their delivery of services. Neither of these business styles has full control of its operations.
The Performers are No. 1. The Performers have complete control of their safety, risk management, fleet, production, staff, training, and overall operations. These are the fewest in the marketplace because it is the absolute most difficult business style to build. It requires lots of capital, management, systems and process for recruiting, training, selling, and development. Performers must inventory hundreds of thousands or millions of dollars of dedicated snow fleet. But in the end, no one can touch the service delivery potential of a Performer. They are the “untouchables” because everyone needs them.
The Brokers and Blenders rarely admit that they rely on sub-contractors, and for this reason, they invented the phrases, “service provider,” or “service partner.” They purposefully refrain from using the curse word “subcontractor,” because they know full well it carries a very negative connotation in the mind of a buyer. So, they carefully use alternative language to mask the fact that their operations are heavily reliant on a third-party company that they do not own, do not hire for, do not equip, and do not control.
Something happened in 2014. It was a moment where I decided it was time to liquidate my interests in a business that I had spent 13 years building. I was part of a franchise system, and I wanted to exit it. There were too many things holding back my true potential if I stayed inside of a system like that. So, I decided I was going to restart, at the time I was 36-years old. As I prepared to exit, I contemplated my business plan.
I decided to build a company that provided a full array of facility maintenance services, and I was going to exclusively work with enterprise-level clients, or in certain markets (the tropics) very high-end residential communities. The business would have everything I previously had that worked, it would eliminate everything that did not, and be completely focused around people. The front-line. The culture would be identifiable on a national scale. We launched ECF on Jan. 1st, 2015.
One of the service lines that would be included in my business offering would be snow-removal, but I had a problem. I could only offer this service in certain cities where I did not previously operate with the franchise business, I had a two-year covenant not to compete. So, while we did some snow removal services early on, it was minimal, only in cities where I could operate. No one knew what we were about to do next. Two years came and went, and that is when the doors opened, and the plan was executed. I was set free.
THE ECF SNOW PLAN
With no contractual restrictions, it was time to reveal the plan. The plan was quite simple, yet very difficult to execute. Do the opposite that everyone else is doing. Follow the core value proposition of East Coast Facilities and self-perform snow removal services but doing so on an epic scale. Focus on a specific niche and client profile and offer something that buyers rarely came across — a very large self-performing snow removal company.
We would strive to become the leaders in industrial snow removal, focusing exclusively on industrial distribution hubs. There would be no more condos, HOA’s, apartment complexes, gas stations, banks, malls, retail complexes. It would be all industrial, and if possible, all big. The bigger the better.
Our plan was to take on the largest and most sensitive sites that demanded guaranteed delivery of service. But it did not stop there. Our plan was to go to the large portfolio and asset managers in our initial markets and scale up to service all their locations, putting self-performance and enterprise-level together in snow removal.
Inherently this master plan would crush the Brokers, and sideline many of the Blenders, it would put the Performer in the first position, and the sky would be the limit. But did it work out like that?
After carefully planning the needed systems, tools, the recruiting and training strategy, capital and credit needs; after methodically planning our marketing strategy, we hit the button. In the summer of 2017, we began to engage buyers. By the winter of 2017-18, we took our small boxed up portfolio from 3 million square-feet to 10 million in one sales cycle. In the past two selling seasons (2018-2019) we took our 10 million square-foot portfolio to over 30 million. Now we have so many opportunities we have had to stop accepting new clients in the first week of October two-years in a row. We built a company that is self-performing snow removal on over 30 million square feet of asphalt in only 3 years, and there is no end in sight.
There are two catalysts to our growth, the construction boom of the industrial markets, and earning of market share from competitors, of which more than half of our growth can be attributed to. But it is the retention of clients that is at the root of growth. We, being a Performer with full-control have lost less than 2% of our clients over the past 5 years.
I have full confidence in our business model, it is the best model to deliver high-level services to serious clients. It is insulated from competition for only one major reason; it is so difficult to copy. The people and cash requirements, to operate this type of business is simply out of reach for most. Not to mention the know-how, in recruiting, training, and staffing the operation. We can offer a competitive service in the market at competitive prices and deliver near bullet-proof services to our clients. We can take on large portfolios for asset and portfolio managers and make their lives easy, while simultaneously maximizing their spend. Now there is a large market player that can offer very specific services to a specific client profile. Game over. We win 90% of what we estimate. If we did not win it, chances are, we did not deliver a proposal.
LEARNING FROM THE MARKET
Watch the marketplace and you will see booms and busts all the time. Take, for example, frozen yogurt. Did you see how many of those places popped up and later just popped? Trends, fads, easy, fast, all lead to one thing — vulnerability. The beautiful thing about snow removal is that someone must physically do it. Someone must be the Performer no matter what business model has the master contract. Doing the work is not going anywhere.
Focusing on the most difficult aspects of this industry and solving those challenges became the catalyst for the boom. Watching the dash to easy made me run the opposite direction because I was confident we had what it took to build and lead teams.
What is in our future? I honestly don’t know. There must be a limit to how big you can get with a truly self-performing snow removal company. I just do not know what that is yet. But that is my model and that is what I am sticking with.
I am passionate about what I do, I believe in what I do. I have opinions, and I have results to rest my opinions on. But I respect each business type and all who work hard to build their business or support the company that they work for.
In the end, there is a place for everyone. Never be worried about a competitor, always be worried about being the best you can be. Innovate and raise the bar in your organization. If you focus on this, you will thrive and survive for years to come.