Strategic Diversification Utilizes Employees and Equipment at Full Potential

A multifaceted growth strategy produces solid results for Pennsylvania pipeline and industrial cleaning contractor

Strategic Diversification Utilizes Employees and Equipment at Full Potential

Matt Thompson cleans the line to a septic tank before inspecting a customer’s system for needed repairs.

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There are many ways to build a successful company. At Koberlein Environmental Services, the formula includes a strong emphasis on diversified services and efficiency-enhancing technology, coupled with a slow-growth philosophy that enables the company to remain focused on quality control and customer service.

As a result of this strategy, the nearly 60-year-old company in Honesdale, Pennsylvania, is a dramatically different animal than it was when owner Chris Ravenscroft bought it in 2001. At the time, the company’s primary focus was septic tank pumping, a seasonal industry that generates poor cash flow during the winter.

But Ravenscroft’s emphasis on branching into diversified services paid off. Gross revenue rose nearly 800% from 2001 to 2018. Employment more than tripled to 53 people. Equipment now includes a large fleet of vacuum trucks, jetting trucks and trailers, pipeline inspection camera systems and drain cleaning machines. And services expanded to include drainline inspections and jetting, industrial vacuuming and bulk-sludge hauling, grease trap pumping, hydroexcavating and septic system installations and repairs. The company even sells and services wastewater pumps.

The company also broadened its geographic footprint enough to warrant establishing branch facilities in Waymart and Ferndale, in southwestern New York.

“A year-round book of business is very important to us in terms of fully utilizing our equipment and employees,” Ravenscroft says about the importance of service diversification. “It base-loaded the company. With that year-round workflow, it’s easier to pay for your fixed costs. And in terms of selling more services, our residential septic pumping part of the business is pretty mature, so we simply needed to look for new customers.”

Moreover, commercial and industrial work generally produces higher profit margins. On the other hand, overhead expenses rise, too, especially due to more expensive equipment and training to meet rigorous safety requirements and regulations. But that also works in the company’s favor, to a degree, because the higher costs also serve as a barrier to market entry for potential competitors. “As a result, you can sustain having a higher cost basis because of those barriers,” he says.

Initially, Ravenscroft says Koberlein intrigued him as a business venture because it already was a well-established and profitable company. He thought it would make a great foundation from which to launch other services aimed at underserved marketplaces on the municipal, residential and industrial sides. “Through diversification and acquisitions, I felt like we could grow,” he says. And his hunch proved correct.

Slow and steady

But as the company grew, its services expanded only incrementally. In fact, it took 15 to 20 years to develop them. That slow, purposeful growth was completely intentional, says Ravenscroft, a real estate lawyer who made an abrupt career U-turn in 1992, when he accepted a marketing and business development position at a Rhode Island-based waste hauling company.

“I realized I didn’t want to sit at a desk and look at the same filing cabinets every day, plus I really like business,” he explains. He then held jobs at two other companies; the last one owned nine businesses, including Koberlein. When that parent company started selling off assets, Ravenscroft jumped at the chance to buy Koberlein.

Historically, a surplus of work was available in the markets the company entered. But Koberlein approached new opportunities carefully and deliberately, first ensuring it could find and develop the right people, invest in the right equipment and nurture those customers — and do it all at about the same speed.

“It wasn’t always easy to get the people, equipment and business opportunities to line up at the same pace,” he says. “But we didn’t want to grow too fast and run the risk of losing control over the quality of our work.”

Aside from creating new revenue streams, diversified services also help the company weather both economic and seasonal cycles. And customers like the one-stop-shop convenience, where Koberlein can handle a variety of needs. That, in turn, engenders repeat business and word-of-mouth referrals.

More benefits

Providing other services also helps drive the company’s commitment to safety. Many of the company’s field employees are cross-trained; as such, it’s not unusual for septic tank pumpers to also work on utility projects and other jobs with extremely strict safety rules and regulations.

Cross-training also allows the company to more effectively leverage its manpower and avoid layoffs. Take hauling sludge, for example. The loss of a sludge-hauling contract could mean layoffs.

“But if those same employees can transition safely and cost-effectively to large utility projects, such as pipeline installations, and we can provide hauling and disposal services for hydrostatic test water, we can pick up replacement work for those sludge haulers to do,” he says.

Great employees — people who are honest, work hard and enjoy assuming new responsibilities — also have been critical to the company’s success. “It all starts with the people who work here,” Ravenscroft says. “Sure, we have great equipment and customers, but that’s because we have really smart, hardworking and capable people.”

Avoiding substantial debt also helped. While expanding services requires a continual commitment to reinvesting in new technology, Ravenscroft says that assuming too much debt can force companies to accept lower-margin work, just to make bank payments.

“Growing slowly allowed us to price work where it needs to be priced,” he says. “If you’re overleveraged and you have to pay the bank, you may end up bidding work just to maintain cash flow. We don’t want to work for everyone who calls us. Instead, we try to sell a value-added service. I firmly believe you get what you pay for.”

Another factor contributed to the growth: the acquisition of three septic pumping companies from 2001 to 2014. The acquisitions added more than 1,300 accounts to the company’s septic customer base and increased the company’s geographic footprint. That, in turn, provided more opportunities to sell additional services to these new customers, Ravenscroft says.

A growing fleet

For industrial and municipal sewer cleaning, the company relies on a Vactor 2100 Plus combination vac truck, built on an International chassis and equipped with a hydroexcavating package, a 12-cubic-yard debris tank and a 4,200 cfm Roots blower (Howden). Two specialty vac trucks, custom-built on a Kenworth chassis by Pik Rite and featuring Robuschi rotary lobe blowers (912 cfm) and 4,500-gallon steel debris tanks, round out the truck fleet. The latter two trucks are used primarily to clean out grit chambers at local municipal wastewater treatment plants and pump stations, he says.

The company also relies on three Proteus crawler inspection camera systems made by Mini-Cam; five RIDGID SeeSnake push cameras; an excavator and mini-excavator, both made by Kubota; a Bobcat skid-steer; six flatbed trailers made by Eager Beavers Trailers and Load Trail; and two enclosed trailers made by Haulmark and Integrity Trailers.

For cleaning drainlines, the company invested in two jetter trucks: One is a Ford F-350 with a 12-foot box body made by Stahl Truck Bodies (a Scott Fetzer company), and the other is a Chevrolet 3500 with a 12-foot utility body from Duramag (a brand owned by F3 Mfg.). Both trucks carry skid-mounted Spartan Tool jetters (2,000 psi at 12 gpm). The two trucks also carry drum machines made by Duracable, RIDGID and Gorlitz Sewer & Drain, plus sectional drum machines from Electric Eel. Koberlein also owns five trailer jetters: three made by Spartan Tool (2,000 psi at 12 gpm) and two built by O’Brien (2,000 psi at 40 gpm and 3,500 psi at 5 gpm), a Hi-Vac company. And for thawing frozen lines, the company owns five Arctic Blasters steam machines.

Continual reinvestments in newer equipment pays dividends in numerous ways, from increasing productivity and efficiency to even attracting and retaining quality employees. “We’ve actually hired people who were sick of working with lousy equipment that always broke down and made customers upset,” Ravenscroft says. “We believe that if you’re driving a truck for 10 hours a day, you should have sufficient horsepower and have air-conditioning that works on a hot August day. Good pay is only part of the equation for creating satisfied employees.”

To ensure the company’s large fleet of trucks is in good working order, Koberlein employs a fleet maintenance manager, Scott Riggs, and five other managers: Gene Mohrmann, Gary Sprague, Bruce Thompson, Dolores Leopardi and Mike Sprague. Collectively, they have more than 100 years’ experience, Ravenscroft says, and are integral to the company’s operations.

“They treat the company as if it were their own,” Ravenscroft says. “They’re largely responsible for making sure we have safe and reliable equipment and for successfully managing the challenges posed by growth and diversification.”

Fostering relationships

Many tangible factors have contributed to Koberlein’s growth. But Ravenscroft also points to an often overlooked and less-tangible asset: Strong working relationships with outside vendors, ranging from disposal site operators to banks to insurance companies.

“These relationships are the underpinning of all our growth,” he says. “It’s almost like having an informal board of directors at our disposal.” For example, Koberlein’s insurance agent, Knowles Associates in Scranton, also has been a great business partner.

Agent Todd Zimmerman attends almost all of the company’s monthly safety meetings. In addition, Jerry Kozich, a representative from Penn National Insurance, attends four or five safety meetings a year and also audits several jobs annually.

Those audits sometimes reveal operating practices or equipment that could pose a liability. In one instance, Kozich noticed a crack in a jackhammer electric cord while auditing a residential job site.

“So at the next safety meeting, we discussed looking at all of our power cords,” Ravenscroft says. “Now we examine power cords on a regular basis. Insurance agents look at the world from a different perspective and they bring value when they do that.”

The insurance company also reviews the company’s new service offerings before they go live, just to advise Koberlein about potential risks.

No resting on laurels

Looking ahead, it’s easy to envision how Ravenscroft might be content to hit the pause button on growth, especially considering all the incumbent headaches that can accompany it. But that’s not how he rolls.

“I think that being comfortable where you are is dangerous,” he says. “I believe you constantly need to figure out how to improve. I’m definitely not interested in staying where we are.

“To do that effectively, we have to try to find new opportunities that make sense for the business we already have. Philosophically, we remain very interested in continuing to grow and diversify.”

Creating a culture of safety

To create a more comprehensive culture of safety at Koberlein Environmental Services, as well as reduce premiums for workers’ compensation insurance, the Honesdale, Pennsylvania-based company created a certified safety committee about eight years ago.

Owner Chris Ravenscroft says the company initially set up the committee so it could bid on jobs from oil field contractors that vet contractors’ safety records through third-party compliance organizations such as ISNetworld and Avetta. “They review things like safety compliance, days lost from on-the-job accidents, state truck inspection violations and so forth, and you have to hit certain standards in order to get work,” he explains.

“But now we do it for utility and power companies, too,” he says, noting that more and more companies are vetting contractors and subcontractors to see if they have certified safety committees.

As a side benefit, companies in Pennsylvania that form a certified safety committee get a 5% reduction on the premiums paid for workers’ compensation insurance. “But the injuries we avoid are much more significant than the money we save. That’s why insurance companies give you a break in the first place — they know they’re going to pay out less on injuries and that the injuries that occur won’t be as serious.

The committee must fulfill numerous requirements, such as providing a paper trail of how safety concerns are handled and resolved. In addition, the state mandates that only 30% of the committee members can leave the committee in any one year, which ensures continuity.

“It’s not cheap,” he says. “There are costs associated with hiring safety-trainers for employees, a fair amount of overhead costs devoted to paperwork and sending documents to third-party compliance companies and subscription fees paid to those third-party compliance companies.

“But the safety committee has changed the culture of our company — made us a safer company.” He says that Koberlein’s experience modification rating (a number insurance companies use to price insurance premiums by gauging both a company’s past cost of injuries and the future chances of risk) is around 0.89. A rating of one represents the national average.

“We’re not standing on an assembly line making widgets,” he says. “With the variety of services we provide and all the trucks we have on the road, there are a lot of moving parts to our company, and the conditions under which we work change almost every day.

“We also work for a variety of industries using a variety of equipment on a variety of job sites. So having a culture that supports safety is a fundamental requirement for keeping employees and the general public safe. About one-third of our employees have served on the committee, so this safety mentality infiltrates throughout the company.”


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