Lance Smith grew up in the Bloomington-Normal area of Central Illinois, and always had an interest in things mechanical. In particular, he was fascinated with all sorts of plumbing - how it worked and what it took to make it function smoothly. "I also dreamed about one day being a small business owner and running a lawn care business in high school." At the end of a 2002 summer job –working in Indianapolis for his cousin’s wedding photography business - he decided to become licensed as a plumber.
The licensing process takes four years. You must first find a licensed plumber to work with and sponsor you as an apprentice. Then you need to complete formal classroom training and field assignments. Lance applied himself, learning not only the mechanics of becoming a plumber but also what happens on the "business" side. He worked in both new construction and the service side. He passed the state test and obtained his Indiana contractor's license in 2007. During this time, Lance first met Terry Illy, a fellow Master Plumber, who would have a continuing role in Lance's future.
For four years, Lance continued working for others. He had always wanted to run a business and began taking on nights and weekend work. This "mini-business" confirmed that he could run a business at a profit and he could get business by word-of-mouth references.
He also noticed that established plumbing businesses - both large and small - were being bought up by corporate America. The role of the plumber was turning into a salesperson, needlessly "upselling" the client to a larger scale. Lance recognized this left a large gap in the Indianapolis plumbing service market for a more service-oriented company - a company that would provide quality, fair-priced plumbing service.
Lance first met with SCORE (mentor Jake Moelk) in January 2011. "My mom and stepdad are the ones who led me to SCORE. Every time I talked about getting into business, they said I should talk to SCORE." At this meeting, they discussed Lance's goals and reviewed Lance’s draft business plan. Over a few weeks, they revised the plan. Jake says, "My biggest contribution was to help Lance switch his approach from presenting himself as a start-up to saying that he had successfully run a part-time business for two years and was now planning to make his leap into full-time entrepreneurship." Lance was already in business just on a smaller scale.
Lance’s plan defined his competitive advantage as his "intellectual property" This is a collection of documents and processes such as contracts, estimating tools, etc. from a former plumbing business owner, Terry Illy. Terry had developed the material when he was running his own plumbing business. Lance felt this gave him a huge leg up in quickly establishing his own business.
The business plan development was doing well, so Jake suggested including another SCORE mentor, Howard Wilcox. Howdy brought expertise with the business plan financials. Lance decided to use the SCORE model to build his financial spreadsheets.
Saturday mornings in the spring of 2011, found Lance, Jake, and Howdy at the Carmel library reviewing the various models Lance had developed. As Lance's proficiency grew, he tested several different models - changing rates to test the impact on profit, changing the business forecast to test cash flow - and so on.
Financials were the focus topic, but the team also discussed and encouraged Lance to explore resources like the City of Indianapolis/Marion County business library. At the end of May, Jake became a "remote" member of the team and Lance and Howdy continued to help "finish" the plan. Once completed, Lance met with banks about funding to help him launch his business.
Lance describes his banking experience as less than stellar. "As I look back on this, I attribute a lot of this to my being a first-time entrepreneur and being naive about the entire loan application/loan approval process." Lance, was strung along in some cases and given misinformation in others. Howdy, responding to his discouraging e-mails said, "I kept explaining to Lance this was not unusual with first-time business-loan applicants and giving him encouragement and advice on how to respond to the setbacks”.
The banks liked his plan and his credit was good, but he did not have good enough records to show the success and profitability of his weeknight and weekend efforts. He felt this hurt him. Banks wanted a pledge on more and more of his personal assets. The bank reviews went on and on. "I feel that the reviews took as long as they did because I was working at the Branch level of the bank and not the main office", says Terry
One bank finally agreed to set up a line of credit (LOC) account to get him started. One big advantage of the SCORE financial model software was the ability to test assumptions - in this case, the LOC amount - and determine if it and Lance’s investment would be sufficient to get the business up and running.
As Lance tells the story, Howdy played a big part in getting him to finally go off on his own. He was still working for his current employer and continuing to ask advice from Howdy on additional "tweaks" to his financial model. "Howdy essentially told me that I was wasting time with additional models, that I was ready and I needed to start!"
Lance launched L D Smith Plumbing in August of 2011. He started with one truck. It had the company mission written on the side - "Providing Quality Plumbing Service for a Fair Price". He worked with the list of clients developed over the past two years and also with a warranty company partner. He advertised in his local community newspapers and newsletters. (Jake became one of his first customers when he arrived home from his travels to find both his hot water heater and soft water system in need of replacement. Jake also became one of L D Smith's first references!)
Lance stayed in touch with Jake and Howdy reporting his progress. Advice and encouragement continued to flow. It was soon apparent his initial sales projections - ones he acknowledges were "conservative" - were low. Both his service business and his warranty work grew faster than he imagined.
The pace was hectic. Lance was burning the candle at both ends. It looked as though he would have to hire his first employee - his second-year plan - earlier than anticipated. "I had achieved my first-year sales and profit projections in less than six months and it appeared that the increased rate of sales was steady and not a fluke."
Lance had a solid candidate in mind for his first hire - Terry Illy. Terry was the source of the "intellectual property" Lance was using in L D Smith. They had worked together at Lance's last employer. But Lance had some concerns about adding the role of "boss" in what was a great "friendship". "I did not want the 'boss' role to interfere with the 'friend' relationship." Lance consulted with Howdy (SCORE) and discussed with Terry what this might mean to their friendship. He decided to extend an offer to Terry. Terry accepted and they set up a second truck for Terry. L D Smith was off and running!
Where is L D Smith today? "So Far, So Good." Lance continues to review his plan and modify it to fit his new reality. He is already thinking about his Year Three goal to run the business from a shop - a physical location. "Running as I am now, out of my home, is getting a bit tight, both inside and out. Almost every day there is an old water heater in the driveway or maybe two."
One option could be finding an existing plumbing business that is on the market with a shop. This acquisition would mean Lance must assure the L D Smith business philosophy - "quality plumbing service at a fair price" – is retained. "Whatever direction I take the business, I know I will have my SCORE team to turn to if I have any business questions. I definitely do not think the business would have even gotten this far without SCORE or Terry's help."