Since 1981, California Energy Consultant Services has been cornering markets left and right from its headquarters in Rancho Cordova, Calif. A weatherization company performing energy audits and blower door tests decades before they became popular, in the 1990s, the company also became one of the first replacement window installation companies in the Sacramento area.
Other business segments have come and gone in recent years. Current owner Phil Isaacs added a siding division after he purchased the company in 2005. Two years ago, the company launched, and has since shuttered, a patio covers division (a market Isaacs ensures is a story unto itself), and has also added a more valuable heating and air division, which proves to be a popular complementary service for West Coast replacement contractors. “We felt adding the heating and air segment would be a good way to combat the rising cost of lead generation,” Isaacs says. “If you’re a one-trick pony in windows or siding, you can’t just go and sell to your old customers, so we tried to diversify as an opportunity to get more business when lead costs were at an all-time high.”
Decreasing lead costs is just one strategy Isaacs and his team are using to drive California Energy’s growth in a turbulent economy. “The mindset here, through the whole company, is that we’re embracing economics and fighting through the downturn,” Isaacs says. “We’re turning the situation around and looking for all the opportunities we can get. And there’s opportunity everywhere.”
Since 2008, Isaacs has truly capitalized on the opportunities afforded to him and his company. Making the right moves has the company poised to grow upwards of 30%, and possibly as much as 50% in 2010.
Self-Generating Sales Staff
California Energy had sales volume of a little over $1 million in 2005, the year Isaacs bought the company. Sales doubled to $2 million in 2006, then to nearly $3 million in 2007. After posting sales of $3.4 million in 2008, the company dropped back down to $3 million last year, but is projecting huge growth for 2010, despite continuing economic difficulties nationwide. The bulk of California Energy’s new sales volume is expected to come from key new staff members that Isaacs hired as soon as the opportunities presented themselves.
“The largest threat from the economy is that lead costs are through the roof,” Isaacs reiterates, noting that a $10,000 marketing effort could yield as few as a handful of leads in recent years. “But now there’s a dichotomy flip,” he says. “In 2000, people were wondering how am I going to get all this work done and how am I going to find good help to do it? Now there are once-in-a-lifetime opportunities, where it’s easy to find skilled personnel, and I’m able to recruit a sterling team that generates new leads for me.”
In a market where many small businesses are shutting their doors, Isaacs has capitalized by hiring those now-former business owners and other high-powered salespeople that used to work for competitors. “One goal I’ve always had for the company is to attract the best people – it’s a big philosophical attitude for us,” Isaacs says. “Some of my background is in recruiting, and what I’ve learned through that unique experience is that the best business advantage you can have is a self-generating salesperson. These people are platinum nuggets – not gold nuggets – and they’re hard to find, but they’re out there.”
After one competitor went out of business, Isaacs approached the owner and brought him onto the team in a sales position. Because that new salesperson is bringing over his own customer list, Isaacs anticipates he’ll be able to generate at least $600,000 in business this year, if not closer to $1 million.
In a similar situation, a contractor dealer business near Isaacs also closed, and Isaacs invited the company’s top salesperson to join California Energy. “She’s used to doing $1 million in sales per year, and in this economy, even if she’s able to do half of that we can generate $1 million in sales between two new salespeople.”
Snapping up top talent isn’t Isaacs’ only approach to growing sales. He also purchased another company after taking two years to cultivate the relationship with a business owner who planned to retire. “You have to keep in touch with people and be humble because someone might be buying your business someday,” he says.
Anticipating that he’ll have to spend some money to nurture another salesperson to handle much of the volume from this acquired business, Isaacs tallies $1.5 million in new sales for 2010, with total sales projected at between $4 million and $5 million.
The Mighty Dollar
When Isaacs felt the economy beginning to turn sour in 2008, buying up businesses and hiring new sales staff wasn’t his first instinct. In fact, he admits to acting on an impulse when he laid off an employee who had been with the company for many years, but whose hourly wage was higher than what he thought the company could afford. “I didn’t want to do it, and I wouldn’t have, but it was a knee-jerk reaction,” he says. “Things were looking really bad, and all I could see was that I could fill her position with someone who was less expensive but who had the same skills. I didn’t realize at the time the amount of bargains there were to be had out there.”
Indeed, bargain hunting became the company’s focus. Isaacs went through California Energy’s budget line by line looking for anywhere the company could save money. “Everything got negotiated,” he says. “We listed every single expense, whether it was for laser cartridges or paper or the pens we buy, we shopped everything.”
Ultimately, the company changed vendors or products for everything from office supplies to the phone system, and negotiated terms and prices on its building lease and insurance policies. Isaacs said a conversation over a beer with one of his new salespeople introduced him to a direct-to-contractor caulking supplier. “We picked up some used equipment and displays, and old inventory from companies that were going out of business,” Isaacs says, “but the last thing you want to do when you’re installing windows is save on caulking by cutting quality. But by simply going with a new supplier vs. a two-step dealer saved us $6,000 a year for a product that’s of equal or better quality than what we had been using.”
Overall, Isaacs estimates that negotiating every company cost shaved about $15,000 off the monthly budget. While some of that savings has been offset by hiring new personnel, he says the changes have put the company in a positive cash-flow position.
Dreaming of a Price Increase
In the face of impressive growth thanks to self-generating salespeople, Isaacs says another area of cost savings for California Energy has been in the marketing budget. “Last year we cut marketing by 50%, which put us at 2.7% of our budget – really low compared to the industry standard,” Isaacs says. “With the new customer lists we’ve been able to bring over, the same amount of marketing just isn’t necessary.” Should the company begin growing too fast and overload occur, Isaacs says the plan is to slow down by raising prices. “If you’re getting every job, eventually your capacity, and space, and installers, and admin staff will get overloaded, and raising prices is a healthy way to put on the breaks” he says. “You’ll end up with a smaller volume but you’re making almost the same dollar wise. Our dream is to be able to raise prices.”
Isaacs says California Energy’s growth strategy doesn’t end in 2010. Going forward, the company plans to hire an operating officer, and is looking into buying a building. “The economy has opened up another opportunity in that property values are as little as 50 or 60 cents on the dollar, interest rates are good, and some of the locations I had dreamed of in the past are now available,” he says. A move could also help subsidize the company’s marketing budget by serving as its own billboard. “If you can place your business in the right location where people can see it, it can almost pay for itself with the marketing you don’t have to put out.”
With a solid focus for the coming year and beyond, California Energy is well poised to reach its lofty goals, though it isn’t without effort. “Over the last couple of years we had to look closely at what we need to do to take advantage of different opportunities that have been created by the economy, instead of just focusing on the negative,” Isaacs says. “We dug deep and were able to capitalize on those opportunities first in our market, and that’s given us great success.”