Three Generations Strong

Three Generations Strong

COMPANIES by Janet Leiser | Senior Editor

A business started 50 years ago by Sheldon Smith is now run by his grandsons, Chris and Shawn Smith. The company is moving its focus away from national builders as it adapts to the housing slump.

S&S Electric Co. revenue is expected to drop by about 28% this year to $20 million, and the number of employees is nearly half what it was two years ago. But the owners aren't complaining.

The slowdown is a welcome respite after the housing boom created what seemed at the time like non-stop work with long six-day work weeks for Chris and Shawn Smith, two brothers that run the Oldsmar-based company started by their grandfather in 1947.

The company, which installs electrical and air conditioning systems and structured cable in new houses from Naples to Citrus County, has gone from a high of 320 employees in 2005 to about 180, where the company plans to stay for the foreseeable future. Its first round of layoffs was in June 2006.

At the top of the boom, in 2005, S&S worked with 75 homebuilders on 495 new homes monthly. This year, that number dropped to about 145 homes a month. The company now targets smaller, boutique builders rather than the national builders it once served.

Despite the construction slowdown, the company will be profitable this year, says Shawn Smith, 35, vice president. He declined to release profit figures, but he says the company has little debt and remains financially healthy. Last year, with revenue of $28.8 million, S&S just broke even.

Starting out

Sheldon Smith started the company in Largo in 1947, but it didn't really take off until a few years later when he became involved in a large Tierra Verde construction project.

Thirty years later, in 1977, Vern Smith took over the company from his father.

In the early 1980s, Vern Smith moved the business to an office/warehouse in Oldsmar, near the Pinellas-Hillsborough county line. At the time, the area seemed to be in the middle of nowhere. The industrial area, which is now crowded and growing, was sparsely populated two decades ago. Douglas Road, the street that's home to S&S Electric, was still a dirt road then.

Shawn Smith looks out the front window of the company's new 28,500-square-foot office/warehouse that was completed last year and points to the only other neighbor that was there in the early 1980s, a blue building cattycorner from S&S. The company's older building is also still used.

Chris Smith, 45, executive vice president, has worked at the company since he was 14, except for a year when he worked for an uncle in Indiana. He says was never given a choice about working there.

His younger brother, Shawn, didn't plan on joining the family business. But he changed his mind after he graduated from the University of Central Florida and worked for Anheuser-Busch Companies in theme park operations.

"I'd just avoided it from the time I was young," Shawn Smith says. "I figured I wanted to get into the big corporate 500. As I worked for a big company, I realized there were more opportunities in the family business."

He joined the business about 10 years ago.

Vern Smith, president, removed himself from the day-to-day operations about a year ago. He remains an adviser to the company, while his sons are the hands-on managers.

Beating the cycles

At the top of the housing boom from early 2004 and to early 2006, Shawn and Chris Smith didn't want to turn away business for fear of losing customers so they took on more work than the company could reasonably handle, they say.

"We needed to learn to say no more often," Shawn Smith says. "We were afraid we'd lose market share if we didn't take on more work."

They fretted that new competitors, from Florida's east coast as well as up North, would take over if S&S declined work.

As a result, they accepted most work and hired pretty much any able-bodied worker that was available, creating more work for all S&S supervisors.

"It was definitely a source of frustration," Shawn Smith says. "The management team had to work harder to maintain the quality of work since the caliber of workers wasn't as good. It wasn't worth the sacrifices.""

Not only did managers have to contend with workers who weren't as skilled or experienced, they also had a high turnover rate, another source of frustration.

As it turned out, Chris and Shawn Smith's worries were groundless, he says. Competitors left the market as soon as work disappeared. During the next boom, the brothers say they would turn down business, rather than take on too much.

Now that work related to house construction has tapered off, S&S is building up its service department, calling on homeowners that received an S&S air conditioning system a decade ago when their house was newly built.

"The slowdown has really forced us to start thinking differently," Shawn Smith says. He still calls on builders regularly, trying to drum up business.

"Everybody we've talked to, especially the larger, national builders, are saying the Naples-Fort Myers market is faring the worst," Smith says. "It's where they have the largest amount of inventory. Some of them say they're thinking of closing the divisions there."

The company's Sarasota-Manatee office is faring well, he says, adding, "We've gotten lucky in Sarasota. We didn't experience the boom in Sarasota and we didn't lose ground."

With 60 employees, the Sarasota office is the first or second largest of the business's four locations.

As S&S shifts its focus to smaller, local builders and consumers in need of maintenance or new A/C systems, Smith says the company is finding that the boutique builders, those who construct 25 to 50 houses annually, are still building. "They say they haven't noticed a decrease," he says.

The brothers hope that business remains steady over the next few years as it did earlier in this decade. "From 2000 to 2004, we had consistent, manageable growth," Smith says. " We had good control over employees and systems."

They'd rather not repeat the out-of-control growth of 2004 and 2005. "I think the subcontractors may have felt it the worse," Smith says.

Secret to success

Many S&S employees have worked for the company for decades. Shawn Smith says that's key to the success of the business.

"We are not highly educated or geniuses, we've just been lucky the people we've recruited are top-class, fantastic people," Shawn Smith says. "We couldn't ask for better employees, from the management to the front line leaders."

While the company isn't for sale, Vern Smith, at 68, has to think of exit strategies, Shawn Smith says, adding, "Is he going to retire or sell to us?"

As far as Shawn Smith is concerned, the company isn't for sale - at least not to outsiders.

"This company has been in my family longer than I've been alive," he says. "I know how hard my father and mother worked and sweated to make this company a success. I couldn't stand seeing the trucks drive around and know they're no longer associated with our family."

While Chris Smith says he's ready for a change after more than 30 years, he doesn't plan to leave anytime soon and he also doesn't want to see the company leave the family.

He says he hopes that Shawn's young son, who just turned 2, eventually takes over the business.

Shawn Smith wants it to be his son's choice to enter the business, just as it was his. Unlike his older brother, who was always expected to help out, even when he was a youngster.

"If I was going away for the weekend, I had to work Saturday morning first," Chris Smith says. "I never had a choice."

Vern and Barbara Smith didn't make that mistake with their younger son. They didn't pressure him to get involved.

Helping Out

The Smith family has been successful in business. Look at S&S Electric Co. started 50 years ago by Sheldon Smith.

Today, Shawn and Chris Smith run the company. Their father, Vern Smith, stepped down about a year ago, not too long after his wife and their mother, Barbara, died in 2005 of pulmonary hypertension. The same disease had previously claimed the life of Barbara and Vern's daughter, Angela Smith-Kline, and Barbara's sister, Rachel.

"Barbara was passionate about finding a cure for pulmonary hypertension and helping those afflicted with the disease," Vern Smith says.

S&S Electric has established two annual scholarships for patients with the disease, which causes continuous high blood pressure in the lungs and an enlarged heart. The fund helps those who can't afford to attend the annual Pulmonary Hypertension Association international conference where patients and physicians come together.

Barbara Smith and her husband found solace in their first conference in 1996, Vern Smith says, adding: "We knew we weren't alone."

BY THE NUMBERS

S&S ELECTRIC CO.

2003 2004 2005 2006 2007*

Revenue (millions) $22.75 $26.4 $30.9 $28.8 $20 *

# Employees (avg.) 250 295 320 275 180

Single-family units n/a 5,846 5,946 3,396 1,750*

Source: S&S Electric Co. *Projected.

REVIEW SUMMARY

Who: Chris and Shawn Smith

Locations: Oldsmar, east Tampa, Sarasota and Fort Myers

Key. Hold onto key employees and adapt to the changing market.