Power to the People
Generator revenues should double next year from 2005 levels, says Personalized Power Systems CEO Frank.
Having mastered the art of selling generators, Personalized Power Systems looks to installation and maintenance for revenue growth.
When Hiram J. Frank was growing up on a New Jersey egg farm, electric generators were as common as air-conditioning units. Keeping his family’s two million chickens cool enough to produce more than 1.5 million eggs a day meant having a round-the-clock power source. It only made sense, in 1996 when Frank purchased his first Florida home, that he’d want a generator of his own.
Obtaining one proved harder that he realized and led Frank to carve a niche business selling generators powerful enough to run entire homes.
“I had no one to really look to, to pattern my company after, so I am kind of building the wheel,” explains Frank, CEO of Boca Raton-based Personalized Power Systems.
During the next five years, Frank estimates more than 170,000 generators will be installed in Florida alone. He is gearing up to grab 5 percent to 10 percent of that market. Standing in his way are local government permitting delays, which he claims slow his sales. For example, even with his company’s seven three-man crews, it can take up to six or nine months to install a generator.
Frank wants to shorten that period to four months by next year, a move he expects will more than double revenue compared to last year.
“My goal is to sell 800 generators this year, going up almost 300 from last year, and get to about 1,000 a year as a steady base,” he says. “That would put me from $10 million to $25 million.”
Frank plowed most of the profit from his now 21-year-old air conditioning business, Personalized Air Conditioning Inc., into the generator venture, and took $1 million from refinancing his home to invest in advertising and infrastructure.
The company sold its first generator in 1998. Frank started advertising heavily in 2000, and sales volume swelled to 50 units that year and to 75 in 2003. Now the company serves Miami-Dade, Broward, Palm Beach and Martin counties.
But Frank had his doubts along the way. In June 2004 he questioned his decision to launch the company. “I was not really developing the type of business I had perceived,” he says.
Hurricanes, such as Frances and Jeanne in mid-August and September 2004, boosted sales to 511 units, each selling at between $20,000 and $25,000. Frank says 90 percent of his customers bought for residential properties while the remaining 10 percent bought for business purposes — many of them repeat customers with his generators in their homes.
Carson Anderson, a vice president for North Carolina-based home improvement retailer Lowe’s Cos. Inc., says the generator industry has seen double-digit growth in 2006 thanks to last year’s active hurricane season.
“We can expect some further activity this year as far as sales go,” Anderson adds. “Suppliers that we are doing business with are forecasting that growth to continue as we look out over the next five years.”
Don Harrison, public relations manager for the Southern Division of Atlanta-based The Home Depot Inc., has witnessed the same demand as his competitors at Lowe’s. “The hurricanes that have battered Florida in 2004 and 2005 have increased homeowners’ determination not to be without power again,” he says.
The trend, especially in Florida, is toward larger units, Harrison says, adding that there is an increase in the sale of whole-house systems that typically start at $3,399 and run up to $6,999.
Personalized Power’s Frank says selling a generator is only 4 percent of the process — the other 96 percent includes getting permits from the local building department, installing it and servicing it. How long can it take to obtain a permit? That depends on where you live. On average, he says, it can takes four weeks for a permit in Pinecrest, 12 weeks in Fort Lauderdale or 53 days in Palm Beach County.
The company can’t control permitting delays but “on that level [servicing and installation] I really don’t have competition yet,” he says.
Frank claims that his knowledge of the air-conditioning business gives him an edge because it helps him determine the appropriate generator depending on how many air-conditioning units a home has. The company’s State of Florida mechanical and electrical contractor licenses and license to work with liquid propane and natural gas — which allow it to install multiple types of generators and do the electrical and repair work — are also an advantage.
“Most don’t have all three, and you really need to have all three licenses if you want to be effective,” he says.
Still, a lack of manpower — Personalized Power is adding an eighth crew this year — slows installations, and the company is booked solid the rest of the year.
Even so, Frank says he’s cautiously expanding because the business is still new. He is studying the market and continuously advertising his products. That includes an eight-week television campaign throughout Palm Beach County that began July 17; a five-week cable campaign from Fort Lauderdale up to the Boca area will follow.
For now, Frank’s focus is on installation. But in five to 10 years, he says, regular generator maintenance will become an important revenue stream. “Customers will be attracted to a company that performs service and maintenance … and pay $1,000 or $2,000 more knowing the company has been around eight to 10 years,” he says.
Right now, Frank is adding a system that lets customers track the status of their generator via the Internet. He is also negotiating with several local developers to add generators as a standard feature on new homes they sell.
“Its my mission to make Boca Raton the generator headquarters — where people would come and see how to pattern these businesses,” Frank says. He adds that in three years he hopes to expand to Sarasota, Naples, Fort Myers and Tampa.
“I would not expand and put my troops and inventory out there unless I know that I could get to you within 12 hours to service you and do maintenance,” he says. –Yeleny Suarez