Meet the MRO Matchmakers - Pro Construction Guide

Meet the MRO Matchmakers

If the pandemic has convinced you it’s time to diversify into facilities maintenance, repair and operations, these industry vets say they can help save you time, money and pain.

It’s times like these that make residential contractors wish they had a few corporate customers with the resources to help them weather the storm.

At least that’s the indication from the most recent Pro Construction Guide survey. Nearly 60 percent of 513 residential construction pros surveyed said they would be willing to take contract work from new channels outside their specialty, including facilities maintenance.

Who can blame them at a time when millions of homeowners remain reluctant to admit contractors into their homes? After all, national retail, restaurant and hotel chains must continue maintaining their properties whether they are open for business or not. Most fast food chains are still offering takeout and still need to keep their kitchen equipment running.

Many have hired contractors to install transparent plastic barriers between cashiers and customers at checkout lines or pandemic-related signage. Even hotels that have closed need to maintain their elevators and HVAC systems. Office buildings and retailers lucky enough to be deemed essential are spending more cleaning their stores, while some non-essential businesses are catching up on deferred maintenance. Lawns still need to be mowed and hedges still need to be trimmed.

The challenge, of course, is not only breaking into the $400 billion-a-year business of commercial facilities maintenance, repair and operations (MRO) but doing it profitably. And that has only become harder in recent years.

Customer expectations are high and rising and margins are falling, thanks in large part to technology that enables facilities managers or their proxies to squeeze costs out of MRO.

For instance, some Fortune 500 companies now purchase all the materials for major projects and ship them directly to the job sites, eliminating an important markup opportunity for contractors.

Also, national chains often work primarily through contractors known as “integrators.” These companies, including some that do tens of millions of dollars a year in business, specialize in subcontracting MRO work to dozens of pre-qualified contractors.

Integrators earn profits several ways, most of which eat into contractors’ margins. In addition to supplying materials, for instance, they usually insist contractors grant them discounted labor rates. Some have developed technology platforms, including mobile apps, that enable them and their Fortune 500 clients to monitor job costs in real time. Some even use geofencing to track when contractors arrive and leave job sites.

Avoiding “Amazonification”

These forces have all led to an “Amazonification” of the industry that is compressing contractor margins, says Michael Brown, who has spent the last 12 years helping national chains outsource MRO work to contractors through his company M.Brown Consulting.

As the executive in charge of North American plumbing services for Home Depot in the early 2000s, Brown procured services from surveying among 20,000 contractors needed to fulfill services homeowners ordered through the retailer. He then took the helm at Home Depot’s largest provider of residential plumbing services. That company employed its own plumbers and owned a fleet of more than 200 trucks in 13 markets.

This experience enabled Brown to amass contacts with strong relationships to facilities MRO managers at some of the nation’s largest retailers, including Walmart, PetSmart and 7-Eleven. Together, they see a steady flow of MRO work, which can be divided into three buckets:

  • Projects: These typically involve upgrading multiple stores across a multi-state region. That could mean installing signage, flooring, checkout counters, customer traffic flow devices, anti-theft systems or lighting.
  • On-demand services: These are one-off jobs that often entail plumbing, electrical, HVAC, refrigeration, flooring, roofing and other repairs.
  • Scheduled services: These include providing maintenance and other scheduled services ranging from groundskeeping and janitorial services to HVAC maintenance.

Some services, such as disaster recovery, could fall into any of these three buckets depending on the customer.

In late 2015, Brown launched the Facilities Maintenance Alliance Program (FMAP) to put his network to work for contractors looking to secure and manage facilities MRO work with national companies and other strategic partners. FMAP essentially enables contractors to outsource sales or management of projects and on-demand work orders to a network of executives with decades of hands-on experience on both the buy and sell sides of the business.

Among them is Mel Redman, who served as senior vice president for both store planning and store operations during a nearly 17-year career with Walmart that ended in 1995. That year he launched a company that represents manufacturers and vendors and their product lines to Walmart and other major retailers.

While Walmart works a lot with integrators at the national level, the retailer also issues regional RFPs for facilities MRO. Redman said smaller contractors, such as plumbers and landscapers, have a real chance of getting a piece of that work through the FMAP.

“A lot of smaller contractors don’t think they can do business with these large multi-national corporations, but they can by participating at the zone or regional level,” Redman said. “If they want to participate, we can figure out a way to make it happen.”

How it works

In exchange for a flat monthly fee, FMAP members gain access not only to leads on facilities MRO contracts but sales support ranging from webinars to client introductions, help preparing RFIs and RFPs, sales pitch decks and even attending client meetings.

By charging a flat fee, FMAP distinguishes itself from lead generation services or integrators, who take a cut of every job. Under the FMAP model, once a contractor establishes a relationship, he or she owns it. If they secure more work from that client on their own, they pay no additional fees to FMAP.

“We are not a lead generation company,” Brown emphasized. “We are not a transactional company. We are not an integrator. We do not work off a commission, we don’t take any percentage of gross margin and we don’t work on bonuses. We are a matchmaker.”

For instance, if you are an HVAC contractor in Norfolk, Virginia that specializes in on-demand repairs, Brown and his partners will market you as such to big companies in your region.

“We are not going to go find a bunch of similar contractors in that area and show them the same opportunities,” Brown said. “We don’t sell the same five HVAC companies the same opportunity. Then we would be like a lead generation company, and that’s not us.”

FMAP’s members typically have annual revenue of $1 million to $5 million and pay a monthly fee as low as a few thousand dollars. However, Brown said he is willing to adjust FMAP fees for small independent contractors who are properly licensed and insured, complying with the laws where they operate and meet other criteria.

“We are looking for contractors who can operate in a compliant manner with a big organization,” Brown said. “We will help them boost their revenue or provide someone to manage that business for you on a 1099 basis. We want to be small and impactful. We never want to be a big line on the P&L — ever.”

The vast majority of the 30 contractors that have joined FMAP have less than $5 million in annual revenue.

“I think it’s an untapped program,” said Redman, noting that personal relationships still matter when negotiating with Fortune 500 companies. “Personal relationships are everything and credibility is everything. If I brought someone to the table that could not get the job done, that would hurt my credibility and I’m not going to let that happen.”

To contact Michael Brown, click here.

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