A Hard-Won Lesson

Virginia contractor credits trade association seminars, and the colleagues they introduced him to, with boosting his business from pitiful to profitable

After eight years owning Atomic Plumbing and Drain Cleaning in Virginia Beach, Va., Jim Steinle came to a painful realization: He was a fine plumber, but he didn’t know how to run a business profitably.

His only business education was a self-taught course in the school of hard knocks. He was tired of taking punches; something had to give. Change came in a new, tuition-free curriculum Steinle discovered right under his nose: seminars and conferences sponsored by trade associations and industry organizations.

Equally valuable was the advice from fellow contractors he met at those functions – people who were, as he puts it, “smarter, brighter and more successful than I was.”

Armed with more and more knowledge, Steinle slowly transformed his ways of doing business. The results were as dramatic as the initial years were painful. Annual revenue jumped from about $450,000 in the early years to an estimated $2 million in 2007, and profit margins went from little or nothing to 6 to 8 percent.

The company now has 18 employees and nine Chevrolet 3500 extended van service vehicles. Each van carries three drain-cleaning machines from Spartan Tool LLC, $8,000 worth of parts, $2,700 worth of tools, and customized shelving and storage from American Van Equipment.

These days, Steinle is a changed man. With self-deprecating humor, he can cite the virtues of flat-rate pricing, list the principles of retaining good employees, explain the intricacies of inventory management, and report to the decimal point the percentage of service calls converted to jobs in the current month.

The hard way

Steinle admits he was naïve about the business world. He learned the perils of going into business with nothing more than technical skills. “I felt there wasn’t a plumbing problem in the world I couldn’t solve,” he recalls. “I just didn’t know how to run a business, much less a profitable business.

“For years, I tried to run the business from my truck, without knowing a thing about profits, pricing, insurance, taxes, inventory, a balance sheet or, most important, how to manage people,” Steinle says. “To pay bills, I worked harder and longer hours, but didn’t charge more money, so things never changed. It was the definition of insanity: doing the same thing over and over again and expecting different results.”

His journey to business enlightenment started in high school. Having no urge to go to college, he started taking plumbing classes at a vocational technical center in his junior and senior years. “I liked working with my hands, and I thought plumbing would be a way to make good money,” he chuckles.

His teacher ran a small plumbing business where students could work part-time as plumbers. About five months after he graduated from high school, the owner of Atomic Plumbing, Jim Lane, asked the instructor if he could hire some of the teacher’s part-timers for a job that was too large for his staff.

The teacher agreed, so Steinle and four others went to work for Atomic Plumbing. One thing led to another, and soon Steinle was working for the company full-time. Lane put Steinle in a four-year apprenticeship program, and he did well enough so that Lane eventually asked him to buy a 25 percent share of the company. Steinle agreed.

Opportunity from tragedy

In 1986, Lane died of a heart attack. Lane’s widow asked Steinle if he would like to buy the business, and he did, under a buy/sell agreement that enabled him to acquire the business over time. For eight more years, he struggled to pay bills, paid himself a scant salary, built up no equity, and endured a revolving door of employee turnover.

All that started to change when he attended an annual Plumbing-Heating-Cooling Contractors Associ-ation (PHCC) state convention in Williamsburg. “I’d been a member for eight years because Jim had been a member, but I never attended any meetings,” Steinle says. “But I heard about some of the seminars they were holding, and I wanted to see if I could learn how to do things differently.

“At the convention, I was welcomed with open arms by guys who remembered Jim and Atomic Plumbing,” he says. “I couldn’t tell you what the seminars were all about, but I do remember talking to many other contractors and discovering we all shared many of the same problems: how to keep good employees, pay bills on time, understand insurance, keep costs down and the like.”

Another contractor told Steinle how he handled employees who showed up late: Send them home for the day. Several days after the convention, an employee gave Steinle a chance to give that method a try. “The next day he was at work 20 minutes early, and he came to work 20 minutes early right up until the day he retired recently,” Steinle notes. “That policy is still in place today.”

Knowledge pays dividends

Inspired by the positive results, Steinle attended every seminar and conference he could, especially seminars put on by Frank Blau and Maurice Maio, who advocated flat-rate pricing.

“When Frank explained about mark-up and profit, that got everybody’s attention,” he recalls. “Up to that point, I was doing everything on a time-and-materials basis. I realized that by not charging enough, I was being unfair to myself, my employees or the company.” Flat-rate pricing turned Steinle’s business around.

“It allowed me to be the professional I’d always wanted to be,” he notes. “For the first time in a long time, I started to enjoy running my business again.” But it wasn’t just flat-rate pricing that jump-started Atomic Plumbing.

Steinle bought uniforms for employees so they would look professional. He trained them to put down a red mat on customers’ doorsteps, then don plastic “booties” before entering a home. Technicians also present customers with a business card, and put down another red mat on which to place their toolbox.

“That immediately shows the customer you care about their carpet or hardwood floors,” Steinle says. “These are all tiny little things we do to exceed a customer’s expectations before we even give them a price.”

Technicians are also trained to look at the big picture – not just the problem the customer called about. With the customer’s permission, they inspect the plumbing and suggest other things that could be fixed to prevent larger problems in the future – and offer a 20 percent discount if the customer agrees to have the work done right away.

Reaching the next level

Steinle credits NexStar Inc., a member-owned network of contractors, with taking the business to the next level by teaching him principles of effective management.

Atomic uses NexStar software that helps Steinle track a host of information aimed at increasing employee efficiency and profitability.

Items tracked include each technician’s dispatch, arrival and departure times; sales and billable hours; and the number of jobs performed per call. Steinle posts the results to create a friendly competition among technicians.

“NexStar taught me how to get down to the real nuts and bolts of running a business – how to determine your break-even point, then add profit on top of that. How to coach and retain employees and track their performance,” Steinle says. “I used to think I had to stand on a desk and yell and scream at employees to get things done. I can’t tell you how many good employees I lost. Now we haven’t had an employee leave in years. I’ve learned there are much better ways to do things.”

Steinle periodically reviews the company’s flat-rate pricing schedule, consulting with his technicians in the process. Sufficient profit margins enable Steinle to offer decent benefits, such as paid vacation time, health insurance, and a dollar-for-dollar company match for employee IRA funds, up to 6 percent of the individual’s salary.

Lessons learned

Looking back, Steinle is amazed at how much his business has changed since 1996. He’s certain many small contractors face the same predicament he did – and could benefit from educational resources.

“If you don’t belong to a trade organization that can help you better yourself and your business, you should,” Steinle says. “There is so much help out there for the typical technician. I know some people don’t join associations because of the annual fees. But I’ll tell you they don’t cost you money, they make money. I get back many times over what I pay for various memberships. If I had started attending PHCC seminars and conferences from the start, I’d be retired by now.”

By having transferred from the school of hard knocks, he’s quickly making up for lost time.



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