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Master of Diversification

Moyer Indoor Outdoor delivers heating oil and operates many other businesses—seven or eight at last count, depending how they are counted. And the company has sold off or otherwise bailed out of a number of ventures over the years as it continually searches for lines of business that can contribute to company growth.

Today, in addition to heating fuel, the company is in these businesses: lawn care; plumbing, water quality; pool and spa; tree and shrub care; HVAC; and pest control. It also operates a feed store.

Bob Williamson, general manager of Moyer Indoor Outdoor, discusses the ups and downs of diversification. Photo by Stephen Bennett/Fuel Oil News

“Here, in essence, is what we’ve learned,” B​ob Williamson, general manager of Moyer Indoor Outdoor, Souderton, Pennsylvania told a trade show audience. Here are highlights:

​A venture into security was instructive. “I got counseled by the best in the business. It cost $300 to $500 a lead… and I sold about half of them, and I lost money when I put the system in. You see the problem? It just takes a long time to achieve critical mass in security. You’ve got to lose money for a long time. We lost money in pest control for ten years, but we were losing like a hundred grand. That’s not a lot of money.” Moyer Indoor Outdoor’s security business “never got busy enough.” However, “At some point it actually had good multiples and when we went to sell it, we were able to sell it to somebody that gave us a really good multiple on the business.”

“When you say, ‘I’m starting a pest control business,’ and you’ve been in the oil business for a hundred years? Nobody cares. They don’t care because they don’t have a problem today. They’re happy with their pest control, they’re happy with their current provider. They don’t care that you’re in it.”

It’s a mistake for a fuel marketer to think, for example, that a large number of heating oil customers “will come flocking to you for their [pest control] needs,” Williamson said. “It’s just not that simple.” Not only do customers not care what else you do, Williamson said, “No one remembers what you do. Especially the non-logical additions. They understand plumbing-HVAC because that makes sense to the consumer. When you go into taking care of their pool and their lawn and pest control? They can’t remember that, and they may call one of your competitors to do their pest control even though you’re doing six other services for them.”

When he meets new people who ask what he does, Williamson finds himself obliged to explain what a home service business is. “I say, ‘Well, we have a heating oil business and we do HVAC.’” Moyer Indoor Outdoor does several more things, Williamson noted, but typically, “It’s challenging to explain, when you do seven or eight things, what they are.” He counseled, “Don’t get frustrated. It’s just the nature of the consumer.”

[An audience member observed that, having been in business for decades, some fuel marketers begin to feel they can sell “anything” to their customers. The audience member asked Williamson to “speak to that.”]

“It goes back to, they don’t care,” Williamson said. Customers may like the relationship they have with a marketer, he said, “but you’re not that good where they’re just going to call you for everything you do. They just can’t mentally get their head around that you’re doing these different things. That doesn’t mean that if you’re in the oil business you can’t sell the tanks. That’s obvious. You put their oil in the tank, you can sell the tank replacement. That’s diversity to them. But when you decide you want to sell life insurance? They don’t need to go to you. They already have a guy for life insurance.

“Your buddies at the country club may buy from you. The people that buy from you right away are typically your friends that are selling you something,” Williamson observed, and they buy that new product or service “because they want to make sure that you know they’re buying from you.”

Having a brand that is recognized by the general consumer helps “a little bit, but not as much as you think it’s going​​ to​ ​​help​,” Williamson said. The tendency is to overrate what a brand is going to do to propel a new venture. “The brand on your truck is still number one. We call everything  Moyer Indoor Outdoor and we’re very consistent. We don’t have several names [for] all these different businesses.”

​​The advantage conferred by a brand is overrated by most marketers going into a new line of business. “You go in thinking, ‘I have this customer. They’re my customer. I’ve had them for thirty years. They love me.’ It’s in your head more than it is in their head. They don’t care as much as you do. It doesn’t mean that they’re not going to give you a little bit of a chance.” But there’s also “a good chance you’ll never get the shot.”

There is a problem that frequently arises with a new venture, Williamson said: “It gets to be a hassle, and guess what? You lose interest, because it isn’t working as well as you thought it would. That’s when you really need to stay attached to the business.” 

In a similar vein, Williamson warned of the perils of delegating the supervision and development of a new line of business. “You have to be careful you don’t get in your own way when you start these other businesses. You will screw it up if you give something to a manager” who lacks knowledge and experience in the particular type of business being launched, Williamson said. He described a hypothetical scenario in which a company owner or manager recognizes that the manager of the lawn care business is dependable, doing a good job, and he’s not that busy in the winter, and suddenly the lawn care manager becomes the manager of the fledgling pool service, too. “It’s a disaster because he doesn’t know what pool service is, he won’t manage it well and eventually he’ll neglect the pool service.”

When scouting around for a new business to get into, Williamson said, “You want to look for a lot of competition. If you decide you’re going to do something and you see there are no competitors, it’s wide open,” the temptation is for a marketer to think they can “own” it. Williamson warned, “There’s a reason there are no competitors.”

Find a business where there are a lot of players, he advised. “It’s like sports bars, it’s like fast-food restaurants. There’s a reason that there are numerous players. People want that service; they want that product.

Surveys may or may not help a marketer who is looking to identify a business to venture into. “You can survey your customers all day long. If you ask your customers today, ‘How interested are you in pest control?’ You know what they would say? They’re not. You know why? They don’t have a pest. They don’t care. Guess what happens tomorrow when their wife calls them at work and screams at them because the stuff they bought isn’t working and there are ants all over the kitchen? Now they need a pest control company. That changed in a 24-hour period.

“You want to be careful what you get from a survey. It’s not as easy as just surveying your clients for what they want, and then doing it.”
Moyer Indoor Outdoor looks for businesses that can provide a 60-point margin.

“I want to do things where I get sixty points after the cost of goods sold. We can control the operating expenses a lot easier.” His working definition of “cost of goods sold,” consists of direct labor and product. “I don’t count trucks. I don’t count insurance. So, in pest control it’s the product they use in your home and the cost of the technician delivering the service.” Pest control product  

costs are 9% and direct labor is 21%, Williamson said. “That’s a 70-point margin in pest control.” On one million dollars, that is a $700,000 gross margin. “We didn’t get there right away, but that’s what it is right now.” With lawn care, product was 14%, and labor, 15%. “So again, a 70-point margin.” Williamson said, “They’re both very profitable businesses because you can drive down the cost of goods sold and you make a lot of money. So, a 70-point margin is a big deal.

“We like things that we can do year-to-year so that when I sell [to] somebody I get them on some kind of program. It doesn’t have to be a contract. It doesn’t have to be their blood on a sheet of paper. But it has to be something so that they know I’m coming back. So, when the year turns… I’ll get all these customers back, buying more services. And one of the beauties of pest control is it’s an urgent-based service, which we love. Because that means if you pick up the phone and you get [there] the next day, it’s your sale. It’s book-the-call. If you don’t book the call, you missed your opportunity. You’ve got one shot. The beauty of the pest control business is, when you book the call you sell the program.”

Williamson acted out a typical exchange between a prospective pest control customer and the customer service representative:

“Mrs. Smith, I’m going to have Jack come out tomorrow. He’s going to take care of the ants. But they’re going to come back, because they always do. So, you really need to be on a quarterly program so that they’ll never come back again. Otherwise, you’re going to be disappointed.”

“I only wanted one service.”

“I know. A lot of people do, but they’re disappointed with one, and I don’t want to disappoint you.”

Williamson told the audience, “Getting that annuity is critical. The only thing we do where we struggle with getting an annuity—and we’re getting better—is our plumbing business.” Annuities are an accepted feature of HVAC contracts. They are accepted by pool owners because pools need to be opened and closed each year. Annuities are integral to lawn care programs too.

Any business in which franchises operate is worth looking into, according to Williamson. “We don’t want to buy a franchise,” he said of Moyer Indoor Outdoor, “but franchises tell us that it’s a big enough business to get into.”

Franchises provide their franchisees a brand and a business model. The latter is like a playbook that includes pricing. For example, Williamson said, a McDonald’s playbook tells the franchisee, “Here’s what you need to make a Big Mac. Here’s how you make a Big Mac. Here’s what you charge for a Big Mac. You don’t have to figure it out.” He added, “You can actually go to the franchise and copy the model, or some of it.”

Ventures that come with limited capital requirements are preferred. “One person per vehicle,” Williamson said. “Ninety percent of what we do [is with] one person per vehicle. The one business that gives us challenges is swimming pools because of the safety covers. We have to put two people in a vehicle for openings and closings because one person can’t drag those covers on and off the pool.”

That makes pools a big challenge in the spring and the fall. Moyer Indoor Outdoor hires extra help then, including college students home for just a week. “It’s a big challenge. Don’t go into the pool business without talking to me first. It’s tough.”

Businesses that involve selling over the phone have advantages. “We don’t like having to go out if we don’t have to. We sell eighty percent of our stuff over the phone.

“One question I always get is, ‘Do we ever double-utilize labor?’ The heating oil and swimming pool businesses complement each other in that respect. “Our pool openers and closers are typically oil drivers. They go from delivering oil in the winter to opening and closing pools in the spring, summer and fall.” In the winter, the pool service workers help field phone calls from heating oil customers. That helps to defray their salaries.

Editor’s note: Bob Williamson was a presenter at the 2019 Heating & Energizing America Trade show in Providence, R.I. This article is based on his presentation. The 2020 HEAT Show will be held Sept. 21-23, again at the Rhode Island Convention Center in Providence. For information on the upcoming show visit www.heatshow.com.

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