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Columns

Hot Rod & Yox - The Sequel

By Ellen Rohr
May 31, 2000
My husband Hot Rod and I sold our plumbing and heating company to Ken Morgan, Lyle Ripley and Mike Pech in October 1995. Ken, Lyle and Mike had been our three servicemen when we owned the company. I received a few calls after my article on why we sold our business, asking how the new guys were making out. So, I thought it was time to find out if ownership was everything they’d hoped — or feared — it would be.

We set up a conference call. It was so nice to visit with them! They are terrific fellows. And the way they have structured their company is very interesting.

Are you thinking of selling your company? Think your employees might be interested in buying it? You might learn something from this article. Kick back, put your feet up and join me for Hot Rod & Yox — The Sequel.

Speedway Services takes off! Mike, Ken and Lyle formed an S Corp., Speedway Services, d.b.a. Hot Rod & Yox. They secured a loan and bought the company outright. They decided to keep our silly name. In fact, Mike said they purposely didn’t change anything when they first took over ownership.

“We knew that what you guys had done was working and so we didn’t want to change anything right off the bat.” Mike felt that the company today operates in much the same way as it did two years ago.

Not your typical PHC business structure Mike said that the biggest difference is their three-way ownership. Mike is the president of the company, but he suggested that if there wasn’t a corporate rule insisting that someone hold the title, they wouldn’t have chosen a president.

Each of them has a specialty: Mike is the Hydronic Heat guru, Ken is an outstanding New Work craftsman and Lyle is focused on Service and Repair, specializing in Customer Service. They essentially run three separate divisions. They sell their own jobs, order their own parts and make their own schedules. It runs like a co-op. Or like a group of doctors who share office space and administrative systems.

Unlike a doctor’s partnership, these guys throw all the money into one hat and parcel out money equally. This arrangement requires a high level of trust, but they seemed satisfied that this set up works for them and no one expressed an interest in changing it.

However, when it comes to after-hours calls, whoever goes on the call gets to keep the labor dollars. They rotate on-call duties and each man makes the determination as to what he will or won’t respond.

Mike said he likes the freedom to make all the decisions about his work, including all pricing decisions. They give each other full rein make the call as they see fit. This could result in an inconsistent experience for the customer, but for the most part, these guys have their own customers.

What was the biggest surprise of ownership? When I asked this question all three men responded that the costs of running a business, especially the tax liability, took them by surprise. Also, they felt ill-prepared for all the legal and governmental requirements. They learned as they went, but it was more hassle than they anticipated to get up and running.

We discussed the transition of the company from Hot Rod and me to the Speedway team. This was a really neat point in the conversation. It was nice to talk about it now that the dust had settled and Speedway Services was doing well. At times during the negotiation we all got a bit testy. It was stressful and uncharted water for all of us.

Looking back, we all agreed that we could have lightened up. Certainly, if I were to sell another company I would take more time and follow a formal plan for training and staying “hands off.” But I don’t know if you can completely avoid the rough spots. In a way it was like a divorce. We had been together a long time and then we were separating.

Overall, is ownership what you thought it would be? I could hear the guys sigh as they mulled over the answer to this question. Overall, it is very different to be an owner than an employee, they all agreed. I recognized the burden of the business in their voices. The busy, profitable months are great. The money makes the long hours and headaches easier to bear. But they agreed it isn’t easy money. The business takes a toll. At this point in the conversation, Lyle was trying to sell it back to me!

Julie “The Glue” McCormick keeps the fellows in line! With all the autonomy, I was assured that Julie McCormick is the glue that holds the group together. Julie worked for me and Hot Rod when we owned HR&Y and her duties have expanded since we left. Julie handles the phone and the customers, dispatches and does the bookkeeping. Atta girl! Although not an owner, Julie is well compensated and is eligible for significant bonuses.

I’m certain that Julie’s phone skills helped transition the company. Customers know Julie and count on her friendly support. And she is unflappable when it gets busy and hectic.

These four people have worked together for many years. They seem to understand and acknowledge each others’ strengths and everyone does what they do best.

Could this tight knit group expand to include another person?

What’s in the future for Speedway Services, d.b.a. Hot Rod & Yox? HR&Y is located in Park City, UT, a resort town. Although the area is growing rapidly, it is a small town, with a year-round population of about 6,000. Still, the guys have been discussing adding another person to the team, to help out during the peak months.

The company’s structure works well for Mike, Ken, Lyle and Julie. But how will they expand? The Speedway Team is currently considering how they will grow their company. They are aware that a healthy business must grow. But how? In which direction?

Should they add a service tech? How about a helper for new construction? Would this person be offered an ownership position? Who would oversee the “new guy.” Not a lot of answers to these questions. And like every other contractor I visit with, they wonder, “Where will we find a good tech?”

And the survey says ...

Another possible option is to diversify their business. What opportunities other than plumbing are available to them? They are planning to survey their customers to discover what needs are not being met with the service currently offered in the Park City area.

You know, that’s a heck of an idea. Ask your customers what they need and want. Then, provide it.

They seemed aware of the dangers associated with branching out from what they know and do well. But I applaud their creativity. The survey is a spot-on way to gather vital information about their market.

And they are all aware that plumbing is tough on plumbers’ bodies. You only have 20–30 years, at best, to traipse around in crawl spaces. Beyond that it’s a miracle that your back and knees still operate. None of the guys see themselves plumbing for the rest of lives.

So, who knows? Maybe Ken, Mike and Lyle will sell HR&Y again. (I think if he is sold too many times Hot Rod will begin to feel, well, cheap.) But the opportunities to sell are so incredible right now. So many more options than we sold just two years ago. Who knows. Stay tuned for Hot Rod & Yox — Part III.

Thanks, Mike, Lyle and Julie for the update. Hot Rod and I delight in your success and we’re proud of you.

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Ellen Rohr is the president of Bare Bones Biz, a training and consulting company.

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