Asteroid Makes an Impact in Commercial HVAC, Aided by ServiceTitan
Sudeep Das has a plan for Asteroid Operating Company.
Established in 2016, the company has entered into one licensing deal and purchased three businesses that had been in business for 20 to 40 years. Asteroid has grown into a $4.1 million HVAC company in 2019, from about $2 million on a pro forma basis in Year 1.
“These are all small companies, but that's principally because we wanted to prove out the concept,” Das, the company’s president and CEO, said. “I'm not looking for a gift-wrapped business, I want to sell eventually as a gift-wrapped business.”
Asteroid’s business is 80 percent commercial, 20 percent residential, in New Jersey, Pennsylvania and New York.
Evolve the business to 50 percent maintenance, 25 percent repair and 25 percent projects and installation.
Maintain growth at 20 percent per year.
Enable all of it with ServiceTitan, an integrated, cloud-based software for the trades that can automate and energize Asteroid’s commercial services company.
A software transition has been the plan since Asteroid was established, but Das didn’t make the move until this year. He expects it to pay off in a big way.
“Right out of the gate, having an integrated software system has been a strategic priority,” Das said. “I had evaluated a number of systems earlier in the acquisition process, then ended up spending a lot more time integrating the businesses and less so on what we're going through now.
“The software systems that have good press, that have the market share, I’ve kept on my radar. And ServiceTitan has been on a short list. We finally got to the point this year to just pull the trigger.”
Some significant hires in 2020, including a general manager, provided the final impetus. The new employees all had ServiceTitan experience. Quality plus familiarity meant something.
“These guys were highly familiar with using ServiceTitan in the commercial service context,” Das said. “It just felt synergistic. Having a new team and having a brand new piece of software that nobody had familiarity with seemed like a lot of risk.
“So that worked in (ServiceTitan’s) favor.”
“Because of the way ServiceTitan works, and given how integrated it is relative to our current systems, I think shortening (our) billing cycle is going to be huge. For commercial businesses, that cash conversion cycle is a big deal.”
ServiceTitan’s benefits for commercial companies
Something else that worked in ServiceTitan’s favor? The opportunity for Asteroid to stand out among the competition, and the ability to move from a demand mentality to a sales focus.
“There’s a lot of opportunity in this business in terms of bringing white-collar discipline to blue-collar businesses,” Das says. “A lot of the founders and owners in these sorts of businesses did not grow up in the white-collar world. They don't have the sales and marketing discipline. They are very good in terms of service delivery, and maybe very good in terms of customer relationships.”
That service mentality is what Das said he looks for in acquisitions.
“Ultimately, what I'm looking for is the existing book of business,” he said. “And if it is mostly service and maintenance based, I am good. What I don't want is a very project-based business where the book has to be built every year.”
With what Das calls a “unique formula” that’s not unlike an insurance policy, Asteroid is moving toward the 50-25-25 business split he wants.
The model is built on the universal truth that mechanical equipment has a finite life. In most contractor-business maintenance agreements, upkeep is part of the deal, but repair and replacement are additional costs for the client.
“That's a frustrating business model, particularly for customers sensitive to repair due to budget-related surprises,” Das said.
Enter Asteroid, which takes full ownership above and beyond maintenance to repair and replacement for one fixed fee. That means a fixed, predictable budget for customers, which Das says is at a discount over historical trends.
“When you have skin in the game and are proactive, the total system costs are actually reduced for all parties,” he says.
It’s a program Asteroid’s staff is designed to sell.
“I have a foundation and a management team and sales team that specializes in converting customers into recurring service contracts in a way that nobody else does in the industry,” he said.
But ensuring profitability required something more, because the formula Asteroid is selling isn’t “plug and play,” Das said.
“As much as the concept is pretty straightforward, to assume that risk requires some analysis and background information,” Das said. “That's sort of the secret sauce, so to speak.”
Asteroid, ServiceTitan share unique approach
But when Das bought the businesses that make up Asteroid Operating Company, there wasn’t a systematic sales effort in place. And there wasn’t an easy way to track service history, something ServiceTitan does easily.
That, he said, isn’t unusual for commercial services companies.
“One of the reasons I bought the businesses was because there was on-tap sales opportunity,” Das said. “Our largest vertical is multifamily residential, meaning we do a lot of work with management companies, homeowners associations, boards managing condo buildings, apartment buildings, and so on.”
Talking to busy building owners and managers requires getting to the differentiator quickly, Das said.
“We’ll say, ‘We specialize in mechanical service management in a way that is very different from what you're used to, and we know your vertical really well,’” he said.
ServiceTitan can emphasize a similar value proposition with potential commercial customers, he said.
“The nature of what (ServiceTitan) brings to the table is that a lot of my peers don't have integrated software systems,” Das said. “They have 50 to 100 spreadsheets, or worse, paper-based systems, for managing their businesses.
“If I was a salesperson (for ServiceTitan), I would say, ‘We are the experts. The amount of money you're spending in terms of resources and time and managing all this, we can collapse that into one integrated system that will bring all the information to one place.’
“When you use those terms, I will immediately know you know what you're talking about.”
Das said he has already seen the benefits of ServiceTitan’s cloud-based software and its ability to integrate and simplify disparate systems.
“There is no demand-side issue in this industry,” he said. “The issue is lack of sophistication, just not having the right tools, the right systems, to help us make the right decisions.
“How can business owners truly leverage that data right now? Every minute that I don't have to spend on mining data, where I can just get it directly from ServiceTitan, is a minute freed up toward growth.
“That, to me (as a potential customer), would be huge.”
ServiceTitan = Money in the bank
ServiceTitan has shortened the cash conversion cycle for Asteroid, too.
“A lot of commercial focus businesses still use very archaic approaches (to developing invoices),” Das said. “The ability for the technician to develop a detailed work order while on site, to capture for job costing purposes, the materials and all the hours? That’s huge.
“Because of the way ServiceTitan works, and given how integrated it is relative to our current systems, I think shortening that billing cycle is going to be huge. For commercial businesses, that cash conversion cycle is a big deal.”
In the end, Das is looking to change the commercial HVAC services industry with a disruptive business model and ServiceTitan’s transformative software solution.
“I laugh about it, but it's true: There was low-hanging fruit here,” Das said. “A lot of companies don’t have ServiceTitan. They don’t have a focus on sales and marketing, or a systematic focus. They aren’t looking at it as a sustainable business that can be a much larger business in the future.”
Das and Asteroid are looking at all those things, and at building a system that can grow in scale and become that gift-wrapped business, supported by ServiceTitan.
And the outcome Das expects? Whether building his business or closing a maintenance contract with a commercial client, it’s clear.
“I feel like if I execute better,” he says, “I should win.”
With ServiceTitan, he can.
ServiceTitan is a comprehensive HVAC business software solution built specifically to help service companies streamline their operations, boost revenue, and achieve growth. Our award-winning, cloud-based platform is trusted by more than 100,000+ contractors across the country.
Ready to learn more about what ServiceTitan can do for your business? Contact our team to schedule a demo today.