Bringing your ‘A’ game to the table is necessary if you want to succeed.
By Mike Price
The third-generation company, with its corporate office located in northeast Iowa in Sumner, opened two additional locations. The new regional offices increase the total number of Midwest locations to four.
CEO Darin Cahoy credits his competitive nature along with an enjoyment in tackling new challenges as fuel for driving the latest company growth. Cahoy’s desire to win can make playing a friendly game of golf not so friendly at times.
“My competitiveness is both a curse and a blessing,” he says, “as I’m never satisfied and always think I can and should do better. Working in the same area for the same people doing the same thing day after day bores me.”
Even now, with the latest expansion still fresh, Cahoy is already eyeing two new areas of possible expansion in the future, but says more research is needed. Cahoy also wants to give at least 18 to 24 months for his recently added locations to be operating optimally before making any decisions.
“The company is always in growth mode,” Cahoy says, “especially in the last few years. We’re trying to be a little more aggressive with our territory and with expansion.”
It’s quite the turnaround in growth since Cahoy purchased the five-man operation in 2002 from his father, Duane. The company, which dates to 1918, serves the municipal, industrial, irrigation, and environmental markets in a seven-state region. It now employs 30 individuals—23 who work in the field.
With today’s economy continuing to pick up steam, expanding your business may be on your mind. Cahoy and others in the industry share their experience in doing so and offer tips for those considering it.
Learn to Let Go
Before considering the notion of expansion, it’s wise to first evaluate one’s management style.
Cahoy, 52, recalls the biggest limiting factor for the first 10 years of owning his company was twofold. He attempted to do everything himself while micromanaging his staff. Learning to bring in the right personnel to fill the right positions was a slow transition for Cahoy.
“What I would share with someone who is looking to grow is, you have to learn to let go,” he says. “You’re going to experience, to a certain degree, some inefficiencies that you wouldn’t experience if you were doing certain tasks and jobs yourself, but you have to keep your eye on the ball and on the big picture.
“It took me a long time to come to that realization and believe what people were telling me. You can’t micromanage everything and expect to grow.”
David Henrich, CWD/PI, CVCLD, vice president of Bergerson-Caswell Inc. in Maple Plain, Minnesota, agrees.
“You’ve got to empower people to want to take on the roles that you need in order to succeed,” says Henrich, president of the National Ground Water Association.
“You have to have people who want to take responsibility for what they’re doing, and that’s the only way you can do that kind of expansion.”
Henrich’s company increased staffing to a dozen in its geothermal department in the mid-1990s to meet the demand for projects across the United States. This demand fell by the wayside by 2015, with two now working in the department.
However, the company continues to operate in a five-state radius of North and South Dakota, Minnesota, Iowa, and Wisconsin mainly because of its environmental drilling services. Occasionally Bergerson-Caswell drills in Nebraska.
“The five-state area has a lot to do with the workforce,” Henrich says. “We’re in a phase with young families who want to be home on the weekend, and quite frankly, people are more important than the work. Without the people we can’t do it.”
If your company is in a life phase like Henrich’s, it will naturally impact future expansion plans. This doesn’t mean your expansion is dead in its tracks, but it may need to be delayed until your workforce is ready for it.
Seek Business Help
Cahoy reluctantly agreed to have a consulting firm evaluate his business in the winter of 2009. It took multiple cold call attempts by the consultant before Cahoy finally relented.
“Sometimes, as a small business owner, you have to kind of swallow your pride and ask for help,” he says.
Despite Cahoy’s initial reservations, the consultant’s assistance has transformed the course of the company’s trajectory.
A clear, easy-to-use bidding format and efficient accounting reporting system provided by the consulting firm jump-started Cahoy’s business to improved profit margins. He advises any business looking to expand or wanting to be healthier and more efficient to utilize outside assistance.
Beyond the bidding format and accounting reporting system, the consulting firm provided Cahoy with a bevy of valuable information after spending multiple weeks poring over the business. It wasn’t easy at first though.
“It’ll beat your ego up pretty bad for the first few days,” he admits. “I wasn’t real happy, but then I set aside my ego and tried to listen to what they were trying to tell me.”
Cahoy has loved working with the financial numbers since purchasing the company, diligently completing budgets, projections, margin projections, and the like for each quarter and year. He then takes those numbers and deduces what it all means for the company. He also leaned on one of his drillers, Mark Claassen, who holds the rare distinction of being a Master Groundwater Contractor and a certified public accountant.
“The biggest thing for me is I had to learn to trust the numbers,” Cahoy shares. “Every time you add an office, add a crew, your expenses go up. Obviously, you hope your topline revenue goes up. You really have to keep good records.
“You have to learn to trust the numbers because you start getting into a whole different realm of bigger numbers and it looks insurmountable. It’s easy to scare somebody off, but if you have good historical data to work off of and keep consistent with your crew, it really pays dividends in the long run.”
Cahoy cannot stress enough how significant the accounting reporting system has been for his company. It’s allowed his team to recognize potential issues and address them in a timely manner—“really crucial when you start having offices that are all four- to five-hour drives from each other.”
Cahoy’s Business Model
Cahoy’s business model to be competitive with their day-to-day pump work is to have offices within a three- to four-hour drive radius of their clients (180 to 200 miles).
It makes sense. Spacing his regional offices within three and a half- to four and a half-hour drives makes truck deliveries more economical and provides overlap for timely service.
“We’re not isolating one crew to one specific geographical area,” Cahoy says. “If one office goes a little slow, it can go help in another area and vice versa.”
Cahoy’s first dive into expansion occurred in May 2006 in southwest Iowa with its Marne location, a 6500-square-foot facility that employs one full-time pump crew headed by Jon Smiley. The location began as a drop-off spot to store material and equipment to save miles on drill and pump rigs. It soon blossomed into an office where a new building was built. The office has allowed Cahoy to work in Nebraska, Kansas, and northwest Missouri.
The two new regional offices that opened this summer are both in Illinois.
Lincoln, in central Illinois, opened in June and employs one full-time pump crew out of its 15,000-square-foot facility headed by Mike Stoddard.
Durand, in northern Illinois bordering Wisconsin, opened in July and is running two pump crews out of two facilities (4500 square feet and 6500 square feet) headed by Ernie Lilja. To help in Durand, Cahoy had this office become affiliated with the International Union of Operating Engineers Local 150.
“By the time we’re finished with the two Illinois offices, we’ll have invested about 15 percent of our topline revenue in equipment, tools, and inventory into each office,” Cahoy says. “We feel the two Illinois offices should each add 30 to 35 percent to our topline by the end of 2019, and Marne add about 25 percent.”
The corporate office in Sumner runs three full-time pump crews and two drill crews out of its two facilities (24,000 square feet and 19,000 square feet).
Bring Your ‘A’ Game
When bidding or working on a project in a state the first few times, Cahoy says prepare to be under the microscope by municipalities and engineering firms. This intense scrutiny will continue until a level of trust is formed and name recognition is established.
“You really have to be on your ‘A’ game and really go above and beyond what’s required,” he warns. “There is a preconceived notion or perception that people who work from out of state are a fly-by-night outfit. They’re wondering if they’re for real.”
To displace this notion, it’s essential to learn and comply with each state’s codes and regulations to a ‘T’ and filing the proper paperwork in a timely fashion. Each state has nuanced regulations, so knowing them and following them are a must. It also helps to develop a solid rapport with the contracting entities and regulatory agencies in the state.
“Again, I’ll revert to having the proper people in the right positions,” Cahoy says. “We’ve got a great person who takes care of all our contracts and administrative and regulatory work that really helps support our regional managers in that aspect.”
Henrich, 40, suggests talking with other water well contractors who work in the area you’re bidding or working in for useful information. You might be surprised at how much can be gleaned from it.
“It’s always struck me how helpful my competition has been,” Henrich says. “I’ve got drilling friends all over the country who I’ve called on when we’re going to an area. You can work these partnerships to help them find more work, to help you do the work right because at the end of the day, most people don’t want to see other people fail for the wrong reasons.”
In fact, Henrich’s partnerships have assisted his company on geothermal projects where the area contractor doesn’t do geothermal. If Henrich’s company needs a water well for their geothermal project, he will have the area contractor drill it.
“There are ways to work with these local partners when you’re moving in,” Henrich suggests, “and it serves other sections of the industry.”
Like Cahoy, Henrich recommends doing everything in a professional and courteous way from the start. That means not underbidding other contractors in the state you’re bidding in and following the regulations.
“If you don’t do quality work, they’ll work on more protectionist rules to make sure people can’t coast in to other peoples’ territories,” Henrich says. “Because at the end of the day, everything is underground. We really only get one chance to get it right. And if we don’t, cleaning it up is just an utter disaster.”
Build a Strong Foundation
Finally, if expansion is in the future for your company, making a commitment in personnel will be vital.
While committing to a piece of property and equipment are necessary components, personnel will either make or break expansion plans.
Cahoy, who based his expansion around his personnel, says as much: “The people we have—both the field crew and regional managers—are very professional and trustworthy. We’re really fortunate to have this caliber of people on board with us. Essentially, without that strong foundation, everything else is just a house of cards.”
Before the most recent expansion took place, Cahoy hired Mike Whittenbaugh in 2015 to serve as president so Cahoy could be CEO. Whittenbaugh, 46, a former U.S. Marine with a mechanical engineering degree, came from an operations and financial management background in the manufacturing and general construction industry with no water well industry experience.
Interestingly, Cahoy prefers to hire people with no experience in the water well industry. He does, however, look for a certain skill set. This unique approach has clearly worked for him.
“Train them up right, safety them up, and help them advance their career from there,” Cahoy says. “We are fortunate to have a very loyal group of people who love working with me and not for me.
“We typically hire by recommendations brought to us from our field crew personnel. We have a unique compensation structure and actually have guys waiting their turn to begin working for us.”
In expanding into Illinois with its two regional locations, Cahoy praises the work Whittenbaugh put in to make it a reality.
“We used Plan Rooms (online bidding site) to get bid documents, and Mike just hustled his ass off,” Cahoy says. “He is very effective when it comes to building relationships.”
You can’t micromanage everything and expect to grow.
Whittenbaugh points to the gentleman who gave him his first break in operations management with instilling a big picture outlook when looking at business growth.
It’s now a running joke in the office, Whittenbaugh shares, but the gentleman used a whiteboard to show where the company currently stood and where it wanted to go. He then said it was up to the individuals in the room to accomplish it . . .and left the room.
Looking back, Whittenbaugh learned the 30,000-foot view of growing a business wasn’t such a crazy way of thinking after all.
“That’s the approach Darin and I talked about a lot,” Whittenbaugh says. “We talked we’re here, we want to get to point X. How do we do it? The key point we kept coming back to was our people. I can’t stress enough how key that is in our success to date and our success as we plan for the future.”
Broken down, of Cahoy’s 23-person field crew, 60% have five or more (up to 20-plus) years in the industry. The rest of the field crew have less than five years of experience.
“Those guys are willing to go out there, maybe travel a little farther, stay away from home a couple extra nights as we built these new facilities and expanded our territory,” Whittenbaugh says.
Whittenbaugh, who has business experience both domestically and internationally, says to consider the cultural differences in the various marketplaces when expanding. His staff has learned to navigate these relationships.
“We try to recognize that as part of our value proposition to the marketplace,” Whittenbaugh says. “By doing that we’ve definitely had success by injecting our reputation and brand management pieces to the business.”
Mike Price is the senior editor of Water Well Journal. In addition to his WWJ responsibilities, Price contributes to the Association’s scientific publications. He can be reached at firstname.lastname@example.org.