Leland Smith, who built heating and air conditioning services firm Service Champions Inc. to more than 2,000 employees, decided to hand off the title of chief executive to his chief operating officer, Frank DiMarco.
“Leland gave me the best compliment ever—he said, ‘I hired myself, just better,’” DiMarco laughed during a recent interview with the Business Journal.
Smith, who will remain chairman, is “still going to help. He has a lot of connections in the industry. He’s still active with me in the business. He’s a seven-day a week guy.”
Last year, the Brea-based firm, the largest residential service provider of heating, air conditioning and plumbing services in the Western U.S., was on a run rate to finish 2021 at $500 million in annual sales.
Smith previously told the Business Journal his goal is to hit $1 billion in annual sales, possibly as early as this year.
While DiMarco declined to provide a current revenue estimate for this year, the billion-dollar goal is “a real possibility.”
“It’s a fragmented industry,” he noted. “We’re on track for all our goals. We’ve done very well with acquisitions and have done well organically.”
Smith comes from a family of plumbers in Kentucky, where he grew up and attended university. He arrived in Southern California at age 25 in the 1970s when his brother offered him a job. Smith started his own plumbing company in 1979 and built it to $5 million in annual sales before eventually selling it in 1997 to the American Residential Services plumbing company, where he worked for a couple of years.
In 2000, he began Service Champions with a goal to provide quality services in an industry known for poor treatment of customers. He hires technicians with pleasant personalities who smile, give eye contact and can make people comfortable.
Service Champions has a subscription service, where for $19.95 a month customers receive a tune-up twice a year in March and October for their systems. If their systems break on a hot or cold day, their systems will be fixed that very day.
Thus far, Service Champions has 60,000 enrollees.
Service Champions goes to market via several local trade names, including Moore Home Services, Bell Brothers, ASI, Adeedo and ProSkill Services.
The secret to Smith’s leadership style among his top executives is that “titles don’t mean anything.”
“I’m not a dictator by any means,” he said last year. “I’m just a team member. We just want to win.”
DiMarco, who has a B.S. in Business Administration from John Carroll University, brings over 30 years of operational experience in the plumbing and HVAC industry, including serving as vice president of operations with Horizons Services and regional manager with Goodman Manufacturing.
He joined Service Champions in 2018 as COO.
“Frank has been an integral part of Service Champions’ formula for success for four extraordinary years and I am confident he will thrive in his new elevated role leading this exceptional organization through future growth and the opportunities that lie ahead,” Smith said in a statement.
Since DiMarco’s arrival, Service Champions was bought in 2019 by private equity firm CenterOak Partners of Dallas. Champions quickly grew revenue to $280 million with $60 million in adjusted earnings before interest, taxes, depreciation, and amortization in 2020.
In early 2021, Champions was purchased by another private equity firm, New York-based Odyssey Investment Partners, for an undisclosed amount.
Part of the reason for DiMarco’s elevation to CEO is to prepare the company for its eventual sale, he said.
“The reality is Odyssey will buy, build and then transact again,” DiMarco said. “You cannot have a brand-new CEO for three months if you’re going to sell the company for a lot of money.”
In the past year, Service Champions has added about 800 employees for total headcount of around 2,000.
No Big Changes
DiMarco said “not a lot” will change during his elevation to CEO because he handled a lot of operations in his prior role at COO.
“My job hasn’t changed a whole bunch,” DiMarco said. “Leland let me do a lot of things when I was COO. From a day-to-day perspective, he lets people do their jobs.
“Leland’s an active chairman. He’s been a good mentor for me. He still works a lot. He still notices things in the business.”
Now, DiMarco will be more focused on mergers and acquisitions and strategy going forward. The firm is looking at acquisition throughout California, as well as the Midwest and Mountain states.
“We are definitely in acquisition mode,” DiMarco said. “It’s getting more challenging because more people are trying to do that.
“We really want to partner with good businesses. It’s less geographic and more about the type of business. All 16 of our businesses are doing very well so we’re very selective about who we add to the team.”
The company plans to stay in Orange County, he said.
“We’re excited about the path of the business. It’s nice to be in a new role. It’s a fun story so far. I cannot wait to write the rest of the book.”