My guests on this episode are Eric Factor and Austin King who together raised a long-term holding company called Era Services with the mission to acquire, operate, and grow industrial service companies. Their first acquisition completed earlier this year is a company called CraneTech which installs and maintains overhead cranes fixed inside factory buildings. Eric and Austin have a connection to another Think Like an Owner podcast guest, Ross Brendel of Westerly Group, an LP of Era Services, who I interviewed on episode 57. Justin Vogt and Ed Redden of Evermore Industries from episode 59 are also an investment of Westerly Group.
During the episode, we discuss all things cranes including how they found CraneTech, challenges and tailwinds facing the business, the ins and outs of the crane labor market, how they’re competing for customers and employees, and what’s next for the business. If you enjoy heavy machinery, you’ll love this episode.
Live Oak Bank – Live Oak Bank is a seasoned SMB lender providing SBA and conventional financing for search funds, independent sponsors, private equity firms, and individuals looking to acquire lower middle market companies. Live Oak has closed billions of dollars in SBA financing and is actively looking to help more small company investors across the country. If you are in the process of acquiring a company or thinking about starting a search, contact Lisa Forrest or Heather Endresen directly to start a conversation or go to www.liveoakbank.com/think.
Hood & Strong, LLP – Hood & Strong is a CPA firm with a long history of working with search funds and private equity firms on diligence, assurance, tax services, and more. Hood & Strong is highly skilled in working with search funds, providing quality of earnings and due diligence services during the search, along with assurance and tax services post-acquisition. They offer a unique way to approach acquisition diligence and manage costs effectively. To learn more about how Hood & Strong can help your search, acquisition, and beyond, please email one of their partners Jerry Zhou at [email protected].
Oberle Risk Strategies– Oberle is the leading specialty insurance brokerage catering to search funds and the broader ETA community, providing complimentary due diligence assessments of the target company’s commercial insurance and Employee benefits programs. Over the past decade, August Felker and his team have engaged with hundreds of searchers to provide due diligence and ultimately place the most competitive insurance program at closing. Given August’s experience as a searcher himself, he and his team understand all that goes into buying a business and pride themselves on making the insurance portion of closing seamless and hassle-free.
My guests in this episode are Eric Factor and Austin King, who together raised a long-term holding company called Era Services with a mission to acquire, operate and grow industrial service companies. Their first acquisition completed earlier this year is a company called CraneTech, which installs and maintains overhead cranes fixed inside factory buildings. Eric and Austin have a connection to another Think Like an Owner podcast guest Ross Brendel of Westerly Group, an LP of Era Services, who I interviewed on episode 57.
Justin Vogt and Ed Redden of Evermore Industries from episode 59 are also in an investment of Westerly Group. During the episode, we discuss all things cranes, including how they found CraneTech, challenges and tailwinds facing the business, the ins and outs of the crane labor market and how they’re competing for customers, employees, and what’s next for the business. If you enjoy having machinery, you’ll love this episode.
Thank you both for joining. It’s great to have you both here at the same time. I’ve enjoyed getting to know a little bit of both of you, so I’m excited to hear more about Era Services and CraneTech. And of course, you have the Westerly connection, which we interviewed Ross in the podcast, and then we interviewed Justin and Ed whoa re with Evermore, which is another part of Westerly. So I’m excited to continue exploring this little community.
Now we’d love to hear about your backgrounds to start off with. Austin, do you want to give us yours first?
Austin King: I grew up on the East Coast, small town farm in Pennsylvania. Ultimately, grew up playing hockey that took me up to the East Coast to play hockey at Providence College. From there that’s when I jumped out to start management consulting at Accenture, and that’s where Eric and I met on the very first day, that orientation. We’ve been lifelong friends ever since. He’s the only guy I knew that could beat me to the office and stay later.
Austin King: We worked on a ton of different projects together, always wanting to start our own thing one day. After about two years, I branched out from consulting, joined Alpine Investors on the West Coast. That’s where I got my first taste of the private equity world. From that point forward, I was hooked. We invested across software services, and then when the pandemic hit Eric and I were like, “What a good time to start a business?”
Austin King: From that point, we started putting some ideas on the whiteboard. This started coming together. We really loved blue-collar services and said, “We’re going to build something in this space,” which we’ll probably get into in a little more detail, but both, I think June of 2020 put in our two weeks and we’re all in from that point and we haven’t looked back.
Excellent. Eric, how about you?
Eric Factor: I grew up in the Boston area, and similar to Austin after undergrad went to work in management consulting at Accenture. That’s where we met and really became friends. When Austin jumped off to Alpine Investors, I jumped into a late stage tech startup in the Boston area called Turbonomic. And over the last few years with Turbonomic is pretty impressive story. We actually just exited that to IBM about a month ago.
Eric Factor: And there I was focused really heavily on the operations side, and so between Austin and I, we felt we finally had the right skillset to go start something of our own. We’ve always talked about it and we’re thrilled to finally be in business.
So how did you come up with the model for Era Services?
Austin King: There was a lot of white boarding sessions, but I think that’s… One of the things that Eric and I really wanted to do is to create something for the longterm. I think at my time at Alpine, I really was focused on the sourcing front and finding great businesses was really hard. And once you found them, we would put a lot of work, energy into them and then just to flip them. So Eric and I said, “Let’s build something that’s going to stand the test of time that’s an alternative to the private equity model.”
Austin King: And that’s when we started thinking about this permanent long-term holding vehicle. What would you add?
Eric Factor: I think it was an evolution that started with the idea. Austin’s a little humble, he’s probably the best sourcing guy I’ve ever met. He’s pretty incredible. But for over his career, he’s found these amazing businesses and then the private equity model is eventually you have to sell them. I think the evolution was, “Hey, where are we selling this?” If you find an amazing business that can stand the test of time and provide outsize returns for investors, let’s keep doing that.
What makes Austin so good at sourcing?
Eric Factor: It’s a good question. He’s charismatic, he can talk to anyone. He can ask extremely well with our guys that are out in the field that are technicians all the way up to your traditional finance, private equity type folks, and the middle ground there is. A lot of these founders are a mix between their former technicians, especially in the blue-collar services world. Their former technicians or maybe they have some sort of background in business, but being able to approach them as a human being, as opposed to coming right out and saying, “Hey, what are your financials? We want to give you a multiple on your EBITDA.”
Eric Factor: That’s not Austin’s approach at all. He’s really good at building a bond with business owners. And one of our investors actually has a funny comment, but basically all Austin has to do is convince them all that he’s their kid. I think he very successfully does that.
Austin King: Appreciate that.
Austin, what do you say to get people comfortable with you really quickly and have them see you as their kid?
Austin King: I think it’s really just spending time getting to know them. And I think even in the private equity world, we’ve raced to get deals done where it’s worth taking the extra step to get to know them on a personal level. What was happening at home? What’s their family like? What are their care about? Go the extra mile to get them a gift or something that shows you put true thought into it. And then I would say it’s asking good questions and learning to speak their language.
Austin King: In the crane world, Eric and I spend a ton of time just trying to learn the lingo. So when you show up to that first meeting, you say something, when they start talking about it, girder crane or gantry crane, they’re like, “Wait, you know what that is?” This is all they know and that really helps us to connect. And Eric and I are both very intentional about that.
Eric Factor: And I think the other piece is just treating them fairly where a lot of private equity guys or whoever it might be is trying to get the absolute best deal possibly imaginable. And that’s why the deal ends up blowing up. We try and find win-win situations.
Dive into CraneTech, how’d you find it?
Austin King: A lot of late nights on Google.
Eric Factor: I think we found CraneTech on page seven of Google.
Austin King: Eric and I really started whiteboarding industries, so a lot of my experience was in HVAC and plumbing and Eric loved the blue-collar services, he was like, “These are resilient businesses.” And so we took all the pros of HVAC and then a couple of the areas that we considered cons or we’d like to improve upon and basically came up with a list of 20, 25 industries and started doing two to three weeks sprints of working through them, finding deals and basically bottoming out if it was an industry we should spend time on, and overhead cranes was one of our top three.
Austin King: And then we started building a proprietary list of deals. And then from there it was find every email we could, find addresses, handwritten letters. Basically pulled out all the stops once we realized cranes was the right space. And after the 10th email and handwritten note, the owner of CraneTech, Jim Stewart finally said that our persistence, we must have something worth saying if we’re this determined to talk to him.
Eric Factor: And for a little more context on Jim, Jim’s not your typical seller where a lot of sellers out there, you’re looking for guys that are 64 or 65, even when you’re finding some into their 70s that are ready to retire and maybe they’ve been around the block for a while, it’s time to let go. Jim was actually 49, and so the big part was convincing Jim that he should take some shifts off the table earlier.
Austin King: Jim has stayed on with the business and has been a great partner to us, gives us a lot of mentorship and knowledge about the industry that we wouldn’t otherwise have. And he’s been advocate for us on deals. He helps on the M&A front and there’s nothing better than being able to go to an owner and say, “Don’t listen to me. You probably think I’m paying you lip service. Just call this guy and ask about his experience.”
Certainly. So what was his role prior to you guys taking over and then what is he doing now?
Eric Factor: Prior to taking over, he was managing all aspects of the business? The VP or kind of GM was reporting directly to him. He had oversight of the financial organization as well. It is a small business, it’s only 20 employees, so he was responsible for all the finances. And then since closing, he’s been able to focus on the stuff that he really enjoys, which is much more on the project estimating side, some of the really, really tactical stuff.
Eric Factor: He’s also a former technician by trade, started in the business when he was 14, I believe it was. Worked for his dad for a number of years and then branched out and started his own thing.
What made CraneTech and by extension the crane business so interesting to you?
Austin King: When we think about it, we started with what we liked about HVAC as I mentioned, and then it morphed into ultimately the characteristics that we fell in love with. It is recession resistant. These have regulations, OSHA is a huge regulatory body in this market, so the government’s mandating a lot of our services anyway, so really non-discretionary spend. Then the other piece of that is that the downtime for our customers when a crane is down, a lot of times that can cost them 20, 30, 40, even $50,000 an hour for every hour that the crane is down.
Austin King: So they basically pull out all the stops and pay whatever it takes to get it fixed as quickly as possible. So really the customers, you’re mission critical to their everyday operation. Everything that you think about in the world is probably picked up by a crane at some point in time. And I think Eric’s famous for saying to everyone that we come into contact with, “Gravity is not going anywhere.” That usually gets a kick out of people and it is so simple, it’s so spot on.
Austin King: And then we’re able to drive really high margins because of those characteristics. And then unlike some blue-collar services, businesses, there’s just much less people intensity. The revenue and cashflow per technician is really strong, which just from a management standpoint is much easier to control. And then it’s less head count that you have to add as you naturally grow the business as well.
Eric Factor: While Austin was talking about the regulations, it’s very recurring in nature. So it does share a lot of those characteristics with your typical search profile.
How do you price your service then? Is there a monthly or annually, quarterly retainer? And then you add any sort of maintenance that comes along. How do you price that?
Eric Factor: We have inspection contracts. Each contract will be for X numbers of cranes. We’ll either do a monthly, quarterly or annually typically. And then based on how many hours it’s going to take, it’s usually either half day full, day increments. They’ll pay for that labor and then for every dollar of inspection that we drive, these are cranes that are getting very heavily used and see a lot of wear and tear. So every dollar of inspection we drive, we’ll typically see somewhere from three to $5 of repair or parts of work.
I remember Eric in our conversation, we were talking about cranes and I think at first I completely misunderstood what type of cranes you actually operate on? Can you walk us through a little bit more of the type of crane that CraneTech focuses on and it has a niche in?
Eric Factor: Good question. These are overhead cranes. People always assume tower cranes, which are the big cranes you’d see in construction or truck cranes, which are the ones driving around on trucks. These are actually fixtures within manufacturing facilities and the customer owns them, we don’t own any cranes. So we’re actually fairly asset-light. And so these are cranes that are used in production, picking up and moving things either… For example, I was out at a customer today, the crane picks up trailers and puts them onto a truck bed.
It sounds like a fun business to run just working on cranes all day. Has it been just, not only intellectually interesting from a business standpoint, but from a product and machining standpoint? Has it been pretty interesting to work on?
Austin King: It’s been really neat. We just sat down with our lead supervisor and we got a crash course into electrical and looking at schematics. And it’s really interesting, I think what I love to see versus HVAC, a lot of the guys would go through the motions. Every one of our employees is extremely proud to be what they call a crane guy and say, “This is what I build. This is what I do.”
Austin King: One of our customers is aerospace and defense customer, and actually they work on nuclear defense systems. And so our technician had to go in and fix a crane that was stopping production on a nuclear defense system. So he very much was like, “I’m proud that I was able to help support the defense of our country,” et cetera, et cetera, because what we do keeps a lot of the infrastructure and everything moving, and I think our guys are really proud of that. And I think we’re very proud of that as well. So it’s great to be a part of such mission-critical infrastructure.
Eric Factor: And it’s really cool to see our customers where it’s really just a cross segment of industry. We have customers from military, defense, contractors, aerospace, automotive, Tesla is a customer, Google is a customer. So it’s all over the place. And we get to see some pretty cool production facilities across all walks of industry.
Austin King: We had to sign our first top, whatever the security clearance and that was a little bit nerve-wracking. I was like, “I don’t know if we’re ready for this.”
Who is that? Was that Google or someone else?
Austin King: No, Google has small cranes and you’re allowed to just sneak in. This was on of our defense contractor, we were moving around some pretty top secret materials.
In crane maintenance, what parts within the crane are you frequently maintaining? There’s the… I’m going to mess up all the lingo as you were talking about earlier, but the motor lifting things up, moving around. You mentioned bumpers at the end of the rail as it goes through the factory, get beat up a little bit, but walk us through a little bit more of what crane maintenance actually looks like.
Austin King: Your most common problem is going to come in your hoist system. That’s actually the motor that’s picking up your load. And then connected to that, you’re going to typically either have a wire rope or a chain link. The wire ropes wear out fast and it’s incredibly dangerous. Your next most common problem is often with your controls where you’re going to catch loads. This is where you start to get into that danger where customers need us to make sure that their workplace is safe. So people don’t usually mess around with that type of stuff.
Austin King: A lot of the problems actually come from operator error, from customers just using their cranes poorly, which we love. We do operator training too, but they beat up their cranes, which means usually more dollars coming in the door for us, but cranes aren’t supposed to be slammed around, they’re supposed to be used pretty tactically. But we’ll have, you mentioned, they’re called end trucks. That’s what’s at the end of the crane to stop it from going off the end.
Austin King: Customers will slam it into the end rather than bringing it to the slow stop that you’re supposed to. Cranes just aren’t rated for that. So end trucks gets messed up quite a bit and your end stops. Those are probably your most common. There a lot of electrical challenges is in the hoist, so a lot of our work is electrical. So those are probably your most common ones. Can you think of other ones that we see a lot?
Eric Factor: It’s an interesting mix of most blue-collar services that we look at, it’s one set of problems where it’s either mechanical, maybe it’s motor control or as electrical. Cranes are interesting that they combine all three, and so there’s a whole host of things that can go wrong in a crane.
I imagine there’s a lot of industry knowledge that are within each of your technicians. So how do you capture that so that the person who’s been running or doing their job for 20 years, you can take some of their knowledge and share it with someone who’s just starting out. How do you institutionalize that knowledge to a degree?
Eric Factor: Right now we’re still pretty small. What we like to do is we pair up the junior guys with the senior guys, and we have really two types of work. We do project work and we do service work. Project work is where we fabricate and install a brand new crane system. So when guys are new, we like to pair them up with a more senior guy and get them out into the field and really work on building a crane from scratch.
Eric Factor: That helps in understanding all the different components and pieces. And then as the trouble calls that they really started to get up to speed on how to fix them. So that’s really as they come, you try and pair them up with a senior guy, get them out in the field. And then we have a really strong supervisor here as well, where you start to get them out of their own and you have them call someone that’s an expert and they’ll get walked through.
Oh, got you. Okay. And how do you organize the pairing up someone who’s younger with a more senior person? Are they rotations? Does this person go with that senior technician for a week at a time or two weeks at a time, then they shift to a different person to learn a different part of the business. How do you organize all of that?
Austin King: We have software system that we do all of our scheduling in and we’ll typically look at like what is coming up for the upcoming week to two weeks. And we would like them to get exposure to different customer basis or different end customers by industry because industry can change what they’re experiencing as well. So we’ll try to match them up based on what the schedule will show over the next one to two weeks. We have some number of senior techs, so they’re all pretty much on the same level where they’re probably going to get the same training for the most part.
Austin King: And then we also have different divisions, we cover Nevada, California, and Arizona. So we’re ultimately… Some of it’s restricted where you don’t have to work within the state, I should say, but you’re only going to have so many senior tax in each state. So we you try to ship them around and get different exposure across states, but logistically sometimes it can be challenging.
Yeah, those logistics of, especially if it’s costing 30, 40, 50 grand an hour when a crane is down. How do you get technicians quickly to a customer site without them getting really mad?
Austin King: We’re actually very blessed that the largest player in the space is called Konecranes. It’s a public company based out of Finland and they have set the bar very low, where they sometimes won’t even respond to a customer for 48 hours. So we can get out there same day or the next, we can usually beat them to the punch. And we win a lot of business from them just by being faster, so thanks to the 100-pound gorilla for moving slowly.
And is that just a matter of you have software that can schedule quickly or is there another element in how your company’s organized that allows you to be respond really quickly?
Eric Factor: Right now we’re light and nimble, and it’s tough to have a software automate that where depending on the problem, it might not be something that you can send a junior technician to, or even between our senior technicians, there’s a very broad set of skills, where some guys might be very good with structural, or welding, or fabricating. And then you have another guy that’s really strong with electrical, was an industrial electrician by trade. So really depending on the problem, you might send a different guy.
Eric Factor: And right now we’re really just light and nimble and we’re all over it. When there’s a trouble call, we just all get together as a team and make sure there’s someone there. As we grow and we scale, we’ll have to find ways we can systematize that and continue to provide the same level of service.
Austin King: The only thing I’d add to that would be, you basically want to, like you said, get everyone in a room quickly, but it’s also just the caring about the customer. They’re so big that losing an account doesn’t matter. We care and we’ve tried to get it to the employee and push ownership out into the field where every employee knows that they’re taken care of. And if they take care of the employee, they’ll take care of the customer. I would say that Kone is no longer customer-centric or customer-first, where we’re trying to embed that culture of being customer-first.
Austin King: And that drives that behavior, which ultimately leads to that faster response time because everyone has just a different level of caring, which I think has worked wonders for us so far.
Is it hard to find technicians to fill these roles as you start to grow?
Austin King: That was probably one of our top three risks as we looked at coming into the trades, because just as everyone’s aware, there’s less and less people entering the trades as the younger come up. So it was something that was top of mind for us and first when we we’re talking to investors, always a hot button issue. So far though, we have had great success. We’ve already hired four new technicians and we’ve had a few job postings out there that have been flooded with applications.
Austin King: So it might be just a sign of the market that we’re in right now, but so far we have had great success finding high quality talent.
Eric Factor: The people that are hard to find are the industry guys with a ton of experience. We’ve been pretty successful in that so far. The junior guys what’s nice about this is you can hire from a very broad pool of applicants. We like to hire guys who they’re either former electricians, former HVAC, and there’s a lot of those guys out there. They’re just such big markets and we pay competitively relative to them. So we haven’t had any problem finding junior guys. It’s the senior guys that you really have to go searching for the right ones.
Austin King: The piece I would add about the senior folks is we’re very lucky to have a compelling story to tell where we can sell the longterm vision. We have figured out why people don’t like some of the larger players in the space, and we’ve basically been able to solve for a lot of their pain points, which gets them really excited to come on. We actually have a senior guy starting in two weeks that they’ve been around the business for 35, 40 years and he’s making the jump over to us because of the vision that we’ve laid out. And we couldn’t be more excited to have him.
Austin King: He’s going to do a lot of big things for the team and it’s exciting to see people come over and say, “We haven’t seen this in this space before,” and the guy’s been around for decades. For us, it’s amazing.
Eric Factor: We sat down with him and his wife over a breakfast and she turned also was like, “I haven’t seen him this energetic and excited since we got married.” I think we’re seeing some good success in that front.
It sounds like you’re really onto something. What are some of those pain points that they experienced at larger competitors?
Austin King: The biggest thing is just not listening to them and then they don’t address what they’re doing, they ship them off. The guy that we just brought on, he has been stuck onsite hours and away from his family for weeks on end. So it’s more using the employees as a tool rather than seeing them as the person that they are. And that’s just letting them have a voice in the room where we did an employee survey, we collected feedback on what they’re looking for.
Austin King: And just the fact that we were listening to them and starting to address a couple of things that they cared about really just move the needle, they’re like, “Wow, you guys actually listened to me.” Then we’re also paying competitively. That also is important to these guys. And we’re also introducing new technology. Eric’s been great about just from his prior experience, bringing in new ways to pay employees where a lot of these guys still live paycheck to paycheck.
Austin King: Where Eric’s working on new system that would get these guys paid weekly, even potentially daily, which really is a huge recruiting tool. That’s another thing that the guys are super excited about. So just little things like that and the list goes on, but those are just one thing we’ve been working on recently that [crosstalk 00:26:54]-
Eric Factor: And a lot of the competitors are penny-wise and pound-foolish, where one of the guys you were talking to you, for example, they had him in a van with four different wheels and that breaks down every 20 minutes. And we put our guys in nice service trucks, and they really care about their trucks and they take care of them, they take pride in them, and they show well at the customer site. Little things like that can go a long way.
Are you able to share a little bit of feedback that you received from some of those surveys?
Eric Factor: The overwhelming response was that they were proud to work for CraneTech, that they took pride in their work. One of the big comments was that they really appreciate the family-like culture at CraneTech, and that’s something we’re going to have to keep our eyes on as grow.
Austin King: And just on that, I guess those whose are all positive, but really the one spot that we saw an area for improvement was in our benefits package. I think it’s something that we’re looking into to see a lot of these guys, health insurance, and et cetera, very important to them. I think we’ve a great 401(k) plan, but the health benefits just genuinely aren’t up to what they should be and so we’re working for creative ways to try to address that over the next 12 to 18 months.
Eric Factor: And the other piece of feedback was the employees don’t really like the location we’re in, especially in California, where our location is in Stockton, but everybody lives 30 minutes south, and Stockton’s not really the nicest area. And we’re going to look at moving the shop south. It’s all pretty straightforward when you really look at it.
Got you. You mentioned the person coming over from the other company with a van with four different wheels and then giving them trucks instead. You can dive into the truck a little bit too. We talked about that before and that was really interesting, but what other things do you do to give them the tools that they need for their jobs and make sure that they’re happy going about their work?
Eric Factor: Another interesting thing In the trades that I think a lot of people don’t realize is that guys own their own tools, where if you look at other industries, everything’s provided to you by the company. Our employees actually purchase their own tools. One benefit that we have given them though, is we give them a tool allowance, a boot and tool allowance, where we let them use and they released $100 a year. But it goes a long way in helping them get those things.
Eric Factor: But it can be really expensive when you start out as an employee, you need thousands of dollars in tools. So new things like that, will loan money to employees occasionally to get new tools, but we really like to see guys that take pride in their tools as well.
I didn’t realize you had to buy your own tools. That is interesting.
Austin King: The nice thing is you get to take them with you if you leave though.
That’s a good point. I hadn’t thought of it that way.
Eric Factor: They do get a lot of wear and tear because they’re used every day. Specialty tools will have the really expensive specialty tools, but it’s not uncommon for a guy to have 10, $20,000 in tools in their truck of which they own all of them.
Is there any historic reason for that? Or is there something else going on that… Because I wouldn’t buy my own laptop if I worked at Google or somewhere else.
Austin King: It actually surprised us too. We weren’t fully aware of that and it’s a good question. I don’t know how far back that dates, but we had not gotten a clear answer, but it’s standard across the entire industry.
When you say someone takes pride in their tools and really takes care of them, what does that look like? Are they just really clean? Are they organized? Do they have a nice looking truck with the organized shelf or the tools are just nice quality? What does that look like?
Austin King: I think it starts with their truck. Like if you see, a truck is basically a tool for them. So if the guy who comes in with a clean truck, his truck’s consistently washed, the tools are organized, they’re put away after. Some of the plants and facilities that they work at, these are dirty, tough environments. The guy that takes time to clean and polishes tools after they’re done, he puts the drill bits away and then cleans every drill bit when he’s done. That’s a guy that takes a lot of pride and care.
Austin King: And I think we even try to think about that as we’re hiring too like who’s the guy who comes in very presentable. Who’s the guy that’s where you go out to his car after the interview, the car is spotless, it’s clean, it’s tidy? Those are the people that go the extra mile. And I think even when we think about, this is probably true of most organizations, but we really focus on attitude and character. We can teach a lot of the guys how to be a great crane guy.
Austin King: You can learn these skills. If you don’t show up with the right attitude every day and a positive influence on the culture, you’re not starting at the right point. So culture and hiring the right attitude is by far our number one hiring metric long before we even get to what skill set do you have.
What area of CraneTech do you feel like you’ve put in the most effort? Besides building your team and culture, what function has taken up the most time for you?
Austin King: We’re lucky that we have two people to divide and conquer because there was a couple. I’ve taken a lot of the finance responsibility. No one in the company had any financial background. CraneTech was owned and run by a previous technician. They’ve never done audit financials and nothing, so we had to do a lot of cleanup work to get the financials to just a standard place. That was probably my core focus, and then Eric you’ve been doing all kinds of stuff.
Eric Factor: Yeah. I would say primarily building the foundation of like systems and process that are going to help us scale to that next level beyond small business. We still have ways to go. We went live with our payroll system last week, our CRM basically in beta mode right now, but excited to go live with that. Austin has put a ton of working on the marketing side. We’ve got a brand new website, we’re going to stand up.
Eric Factor: And then even systematically, our management cadence of how we’re getting the team together and working through issues or priorities for the week. We’re finally at a point now where it feels like the team’s really all growing in the same direction, where in the past they’d never had meetings before. It was all, someone would call someone. Now we’re really, every Monday we get the whole team in the room for an hour. We go through everyone’s priorities for the week.
Eric Factor: People finally start communicating about all the different things that are going on and what they need from everyone. And we found it’s been really productive.
What do you think is the greatest constraint in growing your business? Is it finding new customers? Is it mainly just hiring or is there something else involved?
Austin King: We’re really curious to see actually, because they’d never had a sales person and they’ve mostly ever spent a year on marketing at $600. So they’ve been growing through word of mouth and just customer referrals, which is really exciting. We think of that as upside that if they’re doing quality enough work where their customers are telling it to their friends, we want to be able to just dump gas on that fire. So I think the time will tell if we’re able to successfully create a marketing playbook and a sales playbook, frankly.
Austin King: We just hired our first salesperson this week, so we’ll see if getting new customers is truly a challenge or they’ve been very blessed in the past to have that natural growth. And I think we were concerned that the technician hiring piece was going to be the largest constraint. So far, that has not been an issue. As we scale and need to hire classes of four or five technicians at a time, you might run into a different problem at that stage.
Eric Factor: I think right now it’s finding new customers, but we’re solving for that. We’re expecting a pretty significant growth rate and new customers following our roll out of the marketing program. And that’s where it’s going to shift to hiring like crazy and making sure that we’re getting qualified guys that fit our culture and will service our customers effectively. There’s a customer, for example, in Arizona who just minds in general, not our customers yet, but we hope to get one eventually.
Eric Factor: But one of them just waited a contract with a different crane company for 10 million a year, for two years, and that’s 12 guys onsite all the time. And right now we only have 14 technicians.
You hired your first salesperson, what are you going to have them do? Are you able to share a little bit more about your outbound marketing strategy?
Eric Factor: Our outbound marketing strategy will be a combination of email campaigns, cold calls, and site visits, primarily. We do expect to get a number of inbound leads now that we’re actually paying for some marketing, but the process is really we’re hiring this salesperson. There’s three types of selling you can do in cranes. You can sell service work and service contracts. You can sell new crane projects or you can sell equipment.
Eric Factor: We’re telling him, “Hey, projects are not your focus.” Service contracts is the number one priority. And from service contracts, you end up getting projects and equipment anyways. He comes from a background of selling equipment. So the big focus is going to be shifting him to selling service contracts. And that’ll be the combination of the inbound leads that we’ll generate. And from there, we’ll also drive some email campaigns outbound and we’ll have him call and follow up on some high priority targets.
Are there potential customers out there who just don’t use any crane servicing company or are you mainly trying to poach from other competitors?
Austin King: There is a trend towards outsourcing because I think historically there was a lot of customers who try to handle this in-house. Some really large customers actually have teams and they have very skilled technicians and in-house fabricators. There is very much customers that do this in-house. I think even as OSHA regulations increase, we’re seeing the requirements for third-party outsourced providers provide these inspections, basically force customers out.
Austin King: Then sometimes some customers will still try to do the repairs themselves, but more or less, they really want the crane experts. And they’re such a mission critical piece of their business that you really need someone to get it right. So there is this continued trend outsourcing and then mostly the others were picking off some of the customers from the Kones of the world, the larger players in the space.
Eric Factor: I think that’s right. Businesses out here in this industry are very good at shooting themselves in the foot. Oftentimes customers just come over because their last crane company screwed it up, or didn’t show up, or didn’t answer their email.
That’s a very basic blocking and tackling type stuff then.
Eric Factor: Yeah.
Austin King: Very much who we want to be competing against.
What are some other tailwinds pushing your business along?
Austin King: We’re watching closely on the political spectrum just to see if this Infrastructure Bill goes through. A lot of our customers would benefit greatly from a new infrastructure package, just all that spending being injected into the economy and a lot of the building products, et cetera. We have some large steel mills for example, that we work with that would benefit. So just from increased customer activity would be great and then the other one is safety regulations are only increasing.
Austin King: OSHA has been upping the requirements year after year. Even those on a state level, Cal-OSHA is the most stringent of all the states. And a lot of states are starting to follow in their footsteps, which really allows us to get on site, even if people who are annual inspections are now quarterly and quarterlies are becoming monthly. So every time we can get on site with the customer, another chance to sell and another chance to build a relationship with the customer that we’re getting that face time with them. So those two are the two biggest that I think about the most.
Eric Factor: I think those are right.
Is there any regulation in particular that has really pushed that along or has it just been incremental increases in regulation each year?
Austin King: There’s no way around, is something that we emphasize here and we’re lucky to have a perfect safety record. Not all crane companies out there have a perfect safety record. When we actually set out to find a crane company, that was on our scorecard to make sure the crane company had a moderate lower than one. Those are things we’re tracking and so there are incidents that happen where people get severely hurt in the crane business. You’re working at heights, heavy equipment, very difficult work setting.
Austin King: So very much, just every time an incident happens, it draws a certain amount of attention from the regulators and usually there’s more regulation to follow. That can be your customer doing something wrong with the crane or that could be another crane company doing something wrong. So those mistakes usually drive regulation.
It sounds like regulation is a boost for you. Is there any regulation of you as the crane company that makes your job incrementally difficult?
Austin King: Just from a paperwork standpoint, there’s a lot of stuff to file with OSHA every time we do an inspection.
Eric Factor: That’s actually the way that we’re going to start differentiating ourselves from the pack too. We’re working on building out some automation into our inspection software that’ll be proprietary to us that will basically make those forums automatically populate where other cranes companies are still doing it on pen and paper. That might actually be a benefit for us.
Austin King: I don’t think the regulation is any way a drag on our business. Every time they add regulation, it’s just more times we get to go see our customers.
Is there anything about the crane business or CraneTech or Era Services that I haven’t asked you yet that you’re excited to share?
Austin King: I think that we’re just excited to be having early success. We had a very smooth transition. I think a lot of things that people that step into this, the transition doesn’t go smooth. We try to be very intentional about getting the team on board and we took time to meet all the employees. I think the most exciting piece that I’m seeing is the buy-in from the employees who are like, “We’re building something truly different.” And it’s not so much where they see us as the bad guys that we’re going to change everything or we’re going to strip things out.
Austin King: We came in, we gave raises, we ultimately tried to improve some things instantly, got some instant wins. But when you see the guys coming in, our VP and one of our key employees said this is the most excited he’s been since he started the company 15 years ago. So when you hear things like that, it gives you energy to get out of bed in the morning and start to really build something that’s exceptional.
Austin King: The word is starting to spread within the industry where owners are starting to catch on where we’re even having people come to us on the add-on front to become a part of this group. And that’s what gets me really excited. We have several live deals right now that fit perfectly with our platform that we’re actively engaged with. And just to see the runway that’s in front of us, I don’t think we could have thought of it like this even six months ago.
Eric Factor: We were just in our California office last week and the momentum feels tangible and everyone’s feeling it. We’re excited.
That’s really exciting. That’s awesome. Moving into some closing questions, Eric, I’ll start with you. What class would you teach in college if you could teach about any subject you wanted?
Eric Factor: I think for me it would always have to be some sort of math or statistics class. I’m a very… Despite him being the CFO, I’m probably the numbers guy. I think it would be some sort of math class to be honest with you.
Austin King: I can attest to that. I probably wouldn’t take the class just because I’d be scared I couldn’t pass. He is a whiz with numbers and just hard to keep up with him.
I believe it. Austin, what about you?
Austin King: I’d have got to create a new course, just because school wasn’t always my forte. I actually think what we’re missing today, I would like to teach a course on relationship building and just ultimately, me that’s a piece of networking. I’m not entirely sure what it would look like, but I think we’re losing touch of what is that human interaction? How do we connect with people below the surface level? And I think that would drive a lot of positive change and it would also drive just greater productivity. That’s ultimately what I would teach.
Your class wouldn’t have speed networking events or anything like that?
Austin King: I’m sure there’ll be a few networking events.
I hope not. Eric, what’s a belief you used to hold strongly that you’ve changed your mind on?
Eric Factor: Austin and I actually talked about this one. I think we’re going to give the same answer here. And it’s, you need to get an MBA, especially in the search world. Neither Austin nor I have an MBA. If you’re out there and you’re an exceptional operator, or investor, or sourcing person, we don’t feel like you need an MBA to be successful. Really you need the attitude, you need the aptitude, and you got to get out there and just get after it.
Austin King: I would say that’s absolutely it. There’s incredibly talented MBAs that we’d be lucky to have on the team, but I thought it was a stigma that I had. I was always planning to go to B-School and then as we got into it, it was a realization that we didn’t need that. Then the only other belief for me that’s drastically changed through this whole thing is that, in the private equity world, I believe that you had to find, buy and flip quickly to make profits.
Austin King: And now thinking longer term, there’s a whole another way to create value in a much more efficient manner, in my opinion, without suffering a lot of deal leakage and everything else, all the transaction costs. That belief has also changed in my mind, but yeah, I totally agree with Eric.
What’s the best business you’ve ever seen? Austin, maybe we’ll start with you.
Austin King: I think my gut tells me to say Google just because I’m pretty sure it’s a monopoly. But the best business that I’ve actually seen and I got my first encounter with them when I was at Alpine. We actually sold the business to them. It’s called Roper. Roper has basically taken this industrial services mindset where they’re strong cash-flowing business and created this technology platform as well, which has expanded their multiple in crazy ways.
Austin King: They’ve been extremely tactical in what they’ve purchased and they’ve bought businesses that have made, I should say extremely creative add-ons. Then I think that their leadership team has just a vision that they’ve then executed on. I can’t say I’ve seen it… It’s from the outside looking in, but their culture seems really strong where people believe. And they’re ultimately something that they’re all pushing towards and fighting towards that same goal at the end of the day, which I think it’s a great business and a shareholder. So after seeing them, I immediately was like, “I want a part of this business.” So I would say, Roper.
Is there anything from the technology element that you could carry over to CraneTech? I don’t know if you use technology monitoring or equipment monitoring type software, but I can imagine different tech platforms would be or could be a good fit, something like CraneTech. Is that something you’ve explored?
Austin King: Yeah, absolutely. In our customer surveys, something we were hitting on early on, which customers would like to explore our IoT with us. So trying to get a few customers that we could partner with, even as we think about this over the years to come. Then Eric also hit on it or just be giving them a portal and holding their information, and actually helping them solve their own business needs outside of just what their crane servicing needs are. We’re actually helping to become a true asset manager for them. I think technology is going to play a huge role in that.
Austin King: And as we’ve seen in a lot of industries, there’s a way to go from reactive break fix to preventative maintenance, which it may save the customer money in the long run. So I definitely think the opportunities there. We’re probably several years out, but I think we’ll ultimately get there at some point.
Eric Factor: And there’s incremental steps we’ll take. Technology is one of the most exciting pieces of the opportunity here, especially relative to our competition where even just building a customer portal where customers can see their inspection reports and see how many cranes they even have is going to be hugely valuable. Then we’ll work from there to get to more predictive IoT type cutting edge software.
You mentioned how many cranes they even have in our earlier call. You mentioned that some customers have so many, they can’t keep track of them. That just blew my mind.
Eric Factor: There’s customers out there that have four or 500 cranes at one facility.
That’s insane. What’s your best business?
Eric Factor: Mine would probably have to be Microsoft. Just tell me a business that’s changed the world so many times, even like Microsoft Office. I don’t know a business today that could stand on its own without Excel. I think we were talking about how there’s entire organizations out there, and I’m coming from a consulting background, especially doing some public sector work. I’ve seen some organizations that would completely fall apart without simple Microsoft program.
Eric Factor: Now they’re pushing to Azure, I see them really taking some market share in the cloud market and their consistent performance. So that’s just been a pretty incredible story.
Austin, do you have any anonymized anecdotes from consulting where a company had a way too many spreadsheets or was relying on them to such a degree?
Austin King: Eric and I, actually worked with this client at different stents, but it was a public transit authority that we won’t say, but the whole system was on Excel. Just how they were tracking trains, et cetera schedules.
Eric Factor: They were losing trains left and right.
Austin King: We had trains that we didn’t know where they were. I don’t know how you lose a train, but it was a mess. But it was very much like we were tracking all the bosses, et cetera, in Excel, and very much was a problem.
How does that work? What do you mean by tracking trains? By location, or route, or what?
Austin King: It was more like the scheduling of trains like where would our trains be at this station, a certain time at this day. What train’s going in for maintenance? When do we have to pull a certain train off the track? You would think it’d be pretty basic stuff, but there is a lot out there and there’s a lot of moving pieces to run a city’s transportation authority.
But I could see where that system would break because it’s just based on where it should be, not necessarily where it actually is. So if something breaks that spreadsheet is now useless?
Austin King: Exactly.
Eric Factor: If they wanted to ask or solve a simple question of how many trains do we have or how many buses do we have? It was not simple. They couldn’t answer it.
That’s incredible. That’s amazing. Thank you both for coming on the podcast. This has been a lot of fun. I’ve enjoyed getting to know a little bit more you both and I’m excited to see CraneTech grow a little bit more and Era Services add a few more companies. So thank you for sharing today.
Eric Factor: Thanks for having us on.
Austin King: No, Alex, we really appreciate it. It’s great to see what you’re doing with the podcast and super happy to be hosted here. So we really appreciate it.
Of course. It’s great to have you guys.
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My guests on this episode are Eric Factor and Austin King who together raised a long-term holding company called Era Services with the mission to acquire, operate, and grow industrial service companies.