Investing in expensive equipment in an effort to diversify services and enter new markets poses a calculated risk, especially when it involves purchasing hydroexcavating vacuum trucks that cost $450,000 or more. But when done strategically, it can pay big financial dividends, as evidenced by Fairway Electrical Services, an Ontario-based contractor.

During the last three years, the company — based in Ancaster, about 40 miles southwest of Toronto on the western end of Lake Erie — has gradually transformed from a commercial electrical contractor into a more diversified underground-utilities company, with an emphasis on hydroexcavating (branded under the name Fairway Utilities). In doing so, it provides a rough blueprint for any pumping professional who’s ever considered getting into the emerging market for hydroexcavation.

So far, the change in direction at Fairway has been successful, as evidenced by the purchase of three hydroexcavating trucks since 2015 (two made by Vacall - Gradall Industries and one by Transway Systems). The business also has invested in a horizontal directional drilling machine manufactured by Vermeer, says Jason Herd, vice president-director of business development and a co-owner of the company.

In 2017, hydroexcavating work — mostly daylighting to expose underground utilities or complex excavating in and around sensitive underground utilities — accounted for about $1 million in gross revenue, about 5 percent of the company’s $20 million in sales. But Herd says he expects that percentage to increase in the coming years.

“The first year (2015), we didn’t even do $200,000 in sales,” says Herd, pointing out that the company’s first hydroexcavating truck was a used Vacall built on a 2012 Freightliner chassis. Because a typical new hydroexcavating truck costs $400,000 to $500,000, he figured it would be more prudent to buy a reliable used truck and see how things panned out.

“At that point, I really wasn’t thinking about a second truck,” says Herd, who co-owns the company with his father, Cal Herd, and three long-time business colleagues: Andrew Bush, Peter Langdon and Thomas Waite. “But 14 months later, we rented a second truck because we had so much work coming in. The work didn’t let up, so we eventually bought a second truck in January 2017,” he continues. “And in March, we took delivery of our third truck.”

NEW TERRITORY

Herd led the business-diversification effort in 2015, after he became a co-owner of the company his father founded in 1991. After earning an electrical-engineering technician’s degree, Herd worked full time for his father starting in 2004.

Two primary considerations spurred the market shift. For starters, the commercial electrical-contracting industry keeps getting more and more competitive, which drives down profit margins and makes it increasingly difficult to win contracts. Moreover, Herd realized the company’s reliance on either renting equipment or hiring subcontractors to do HDD or hydroexcavating work was hurting the company’s bottom line.

“We were spending obscene amounts of money subcontracting out those services, plus it’s inefficient if you have to wait for them to arrive on a job site,” he explains. “In the electrical trade, it’s always better to run a wire from A to B without joints. … With joints, you introduce a point of failure. You also can apply that concept to subcontracting. So we decided to avoid that point of failure and keep as many services in-house as possible.

“Dad was on board,” adds Herd, a self-described risk-taker. “Sure, there was a little bit of apprehension. It was a big risk, investing about $700,000 in a drill and a used hydrovac truck. But it felt right to me.”

Ironically enough, the significant investment in equipment was a positive as well as a risk. Why? It presented a high barrier to market entry by more competitors. Sure, there were already other local companies doing hydroexcavation work. But there aren’t many who are so diversified, Herd explains.

“We are somewhat unique because we can offer services from A to Z — serve as a one-stop shop for our clients,” he says. “When we worked on street-lighting projects, we found that not only were we calling subcontractors to help us out with daylighting or excavating holes for streetlights, so were the general contractors for whom we worked. We thought that was silly. Now we have the best of both worlds because we can work in-house or get hired as subcontractors for hydrovac work.”

MEETING CUSTOMERS’ NEEDS

So what’s the takeaway here? Always be on the lookout for ways to not only work more efficiently, but provide better service for customers, too, Herd suggests. Furthermore, when making investments in equipment, don’t expect growth to occur overnight.

“It took time for our business to develop,” he explains. Getting the word out to general contractors the company already knew, plus leveraging contacts developed from memberships in different professional organizations, helped generate business. “Or contractors would see the truck rolling down the road,” he adds. And hydroexcavating jobs sometimes led to electrical-contracting work, too — another benefit of offering diverse services, he notes.

Another key to success: strategically timing the purchase of additional trucks. “It was a challenge to navigate growth on the utility side of the business — ensure we didn’t get too far ahead of ourselves and buy equipment before we had enough need for it,” Herd says. “You get excited about this one job and expect you’re going to get five others right after it, but that’s usually not how it works.”

To avoid buying expensive hydrovac trucks and then watching them sit idle, Fairway typically rents equipment when increased demand starts to outstrip the company’s capacity. The purchase of additional trucks and other equipment comes only after company officials determine as best they can that the increased workload is sustainable.

“Sometimes we also hire subcontractors,” Herd adds. “It can make you grind your teeth a little bit because you’re handing over a check when you could be making a payment, but sometimes that’s the best short-term strategy.” 

FRIENDLY COMPETITORS

The use of subcontractors raises another point: Good relationships with competitors can pay off in unexpected ways. For instance, if a hydrovac truck breaks down or Fairway is so busy it can’t take on a project for a good customer, it helps to have friendly competitors who can pick up the slack.

“If need be, we’ll call a competitor and give them the business, just to ensure we don’t let our customers down,” Herd notes. “And it works both ways — sometimes they call us when they’re in the same situation.”

To bolster customer service, the company hired Eric Langdon, a dedicated hydroexcavating and HDD operations manager who is customers’ go-to contact for service. Langdon has a wealth of experience, and having him as a sole point of contact makes it easy for customers to get what they need with one phone call. “He has a dedicated extension on our phone system and customers know that whatever they need, they can call him practically 24/7,” Herd says.

To provide great customer service also requires investments in reliable equipment. For hydroexcavating, the company relies on two Vacall AllExcavate models, built out on Freightliner and Western Star chassis with a 12-cubic-yard debris tanks, a 1,300-gallon water tank and a Roots blower from Howden. The third hydrovac unit is a Transway Systems Terra-Vex 125 built on a 2018 Western Star chassis.

The company also owns a Vermeer 20x22 HDD machine with 20,000 pounds of thrust and pullback force; 15 mini-excavators made by Bobcat; two rubber-tire backhoes made by Caterpillar and John Deere; five Bobcat skid-steers; two digger-derrick utility trucks built on International and Freightliner chassis and outfitted with Altec Industries augers; seven dump trucks with dump bodies made by Voth Truck Bodies: six GMC 3500s; one Freightliner M2 that doubles as a dump truck and roll-off truck; and four Ford F-550 bucket trucks, each outfitted with a 37-foot Altec Industries articulating boom lift.

MORE GROWTH AHEAD

Herd says the company’s exponential growth — from $6 million in gross revenue in 2013 to $20 million in 2017, just four years later — was a pleasant surprise. “We’re very happy to be where we are,” he observes. “I’d be lying if I told you five years ago I was expecting the growth we’ve had. … It’s very rewarding to be able to look back and say, ‘Remember when we were that small?’”

Looking ahead, Herd says he expects further growth. If business continues as it has, he says buying a new hydrovac truck every year isn’t out of the question. Along the way, company officials also are discussing hiring a full-time mechanic to cut the turnaround time on repairs, which the company currently outsources.

“In five years, I see our company becoming even bigger and better than we are today,” he says. “Now that we’ve hit $20 million in sales, I’d like to hit $25 or even $30 million. It’s totally doable as long as we continue our focus on diversification and niche markets — develop a customized book of services that’s aimed at suiting whatever our clients need.”

Scoring big on stadium project

It’s not unusual for a small and growing company to land a big project that becomes its signature achievement and serves as a springboard for more large jobs. At Ontario-based Fairway Electrical Services, that particular job involved installing all the lighting plus the underground civil work for electrical and telecommunication lines at the $145 million Tim Hortons Field, home of the Hamilton Tiger-Cats in the Canadian Football League.

The company was awarded the $13 million contract in 2013, and it posed challenges from the start. The first hurdle: The field was scheduled to host the soccer portion of the Pan American Games in summer of 2015. In addition, the company had to hire roughly 110 new employees, bringing its staff to around 150 people at the peak construction period, says Jason Herd, vice president-director of business development and a co-owner of the company, based in suburban Hamilton.

“It was an insane amount of pressure to get that project done,” Herd says. “We never dreamed of competing on such a large project. But we put in a bid and got lucky, and the rest is history. … We did about three years’ worth of work in 18 months.”

The scope of the work included installing all the field-of-play and parking lot lights, plus all the excavating for underground electrical and telecommunications infrastructure. The company’s hydroexcavators were utilized to expose underground lines to place new electrical lines. Employees laid more than 20 miles of telecommunication and electrical wiring for the underground wiring alone, Herd says.

“We scrambled to find people wherever we could, and we also had to keep up with our work for our regular clients,” Herd points out. “We only had 40 employees when we won the bid. It was wild. I moved my office down to the stadium along with a couple of our other project managers.

“It was controlled chaos,” he adds. “But on the other hand, it really spoke to our company’s capabilities. Not every company could jump on a project like that. We ultimately got the job done, thanks to a very good on-site project management team and the tremendous skills of our workforce.”

Herd says the company’s success on the project led to other big contracts, such as a $3.5 million contract to wire a train-layover facility in Kitchener in 2015; a $13 million street-lighting retrofit project for the region of Waterloo, which involved changing over 42,000 street lights from conventional lights to LED lights in just 10 months in 2017; and a $1.2 million LED street-lighting retrofit project for the city of Hamilton (converting 27,000 lights in 10 months) in 2017 and 2018, he says.