How 5 Founders Left Their Jobs To Start A $4.5M Heating & Cooling Business
Hello! Who are you and what business did you start?
My name is Mike Luongo and I am the Managing Member of Total Home Supply in Fairfield, NJ. Total Home Supply was founded in 2010 by a group of disgruntled people working for other Internet companies. We were not happy with the direction of these companies so we got together under a common concept of creating a company that would treat our customers the way we would like to be treated.
Since we sell heating and cooling products that can be purchased elsewhere, we knew we needed to find a compelling reason for customers to choose us. We also knew that just selling cheap was not the answer so we became the leader in customer service, both before and after the sale.
The above is why we have double-digit growth while our competitors struggle to maintain the volume from previous years.
We have averaged 20% growth per year with our biggest year almost doubling. Our customer base has also been growing at an average of 28% per year.
What's your backstory and how did you come up with the idea?
I have a background in both retail and wholesale. I have been with wholesale distributors, retail appliance chains, and Internet-based companies. This background has helped me to learn what is important to succeed. Having watched many companies grow in the 70s, 80s, 90s and into the new millennium, I have seen them have explosive growth, then crash. This was a common thread. This was not what I wanted for Total Home Supply.
Our other founding members bring different talents to the team. Our data entry manager, Elaine. was the head of data entry at another company where she had 6 people on her team. Another member, Kathi, had a writer's background. Mickey Luongo, my son, learned from the ground up. He joined my previous company at the age of 14. He started in the warehouse where he learned everything from sweeping the floor to preparing LTL shipments. He worked his way up and eventually joined the management team and also got into sales. Stu has over 30 years in retail as the owner of Joe D’s Appliance selling major appliances in the northern New Jersey area.
I knew to build a better and long-lasting company, the key was to give customers a reason to make their purchases from us. Offering more knowledge of the products, the ability to help design the correct solution for their needs, and support and troubleshoot any issues after the equipment was purchased, would be the differentiator.
Take us through the process of designing, prototyping, and manufacturing your first product.
Our first product was our website and our people. We knew that we needed to create a great online experience for our customers. We used a combination of commercially available software and some custom development to make our unique shopping experience that helped make complicated products easier to buy.
Staying focused was the most important lesson I learned. We wasted time and money trying to be in too many categories in the beginning.
When we started Total Home Supply, we decided to have everyone work from home to keep the costs down. We invested in a phone system that would allow everyone to work no matter where they were. We used online tools to share information and keep us updated.
We began with manufacturers and distributors who would ship for us. We worked with trucking carriers that would pick up from all the various locations. We spend a lot of time coordinating both information and shipments. Eventually, we partnered with a storefront where we would handle some of our own shipments.
We reached out to one of our friends at Amana, a company that makes commercial air conditioners. We told him what our plan was and asked if he would sell us. We knew if he would work with us, the company would drop ship the orders for us. He was the first to get on board. When we launched our site, his line was a major part of our original sales. We also reached out to a few of my old contacts and asked if they would work with us. The response was positive, so we used the products that were available to us to build out the site.
This process proved to me that relationships are everything. All the years of working with these people and treating them fairly really paid off. When we needed their help to get our business started, they were there for us.
Describe the process of launching the business.
Initially, we were selling several categories. We were selling HVAC products, major appliances, hearth products, furniture and more. We spent months and months working on crafting custom descriptions and making sure we listed all available specs.
We learned to focus on the areas of the business where we excelled and bring in help for the rest. Once we brought in a digital marketing agency, it allowed us to focus on the higher-level issues.
We borrowed $50,000.00 from a friend to finance the start-up. This paid for the expenses to get the site up. It also covered some advertising in the beginning. Our first paid ads were with Shopping. We tried other services like pricegrabber, but at the time Shopping gave us the best results. Over the years, that has transitioned to Google Shopping and Bing.
Our founding group was given shares of the company. To keep the expenses low, we did not have payroll. We only covered expenses. This also meant that everyone involved was an owner, giving them a reason to work harder.
Below is an example of our first website. As you can see, we were into too many categories. On this page alone, you will find an air conditioner, cooking range, couch, fireplace, and beverage cooler. The top banner at that time was a walk-in tub.
In 2013, we launched our first upgrade. We were still into too many categories but our front page was much cleaner. We also learned that it was a good idea to tell our story on the front page.
The next upgrade came in 2016. This is when we launched our mobile-ready site that was a responsive design. This is the format we use today although we do keep upgrading the site.
If we were able to go back and do the beginning again, we would not have entered so many categories. We would have stuck with one category and build to strengthen it. Our plan lacked focus that overtime we developed. That helped us get where we are today.
Since launch, what has worked to attract and retain customers?
We found the key to attract and retain customers was simple. Treat a customer the way you would want to be treated. Since the day we opened, we answer all calls with a human, not voicemail. We always try to help the customer determine their real needs, not just sell them something they call about. If a customer is going down a path of destruction, we will do our best to talk them out of the mistake, including not sell them the wrong equipment.
When we work with a customer designing a heating and cooling system, we spend as much time as they need. We have found that the vast majority of customers respect our time and order the equipment after we spend countless hours helping them.
We dropped our email campaign several years ago when we realized it was ineffective. I think people do not want to receive emails about high ticket items they may only buy once in many years. We found building a strong organic website, supported by up to date relevant blogs, bring more traffic than the email campaign.
Here is an example of one of our blogs on a Daikin mini-split system.
When you treat people fairly, they come back. That is the key to our returning customers. We have many commercial and residential customers who return to buy. It is very rewarding to have a customer come back, over and over again.
How are you doing today and what does the future look like?
We have been blessed with slow consistent growth since we opened. This year, we have added three new people to the team, a new sales and support person, with a person who processes the orders and a full-time person in the warehouse. This brings our team to 7 full time and 1 part-time member.
At the end of last year, we moved into a new facility with a larger warehouse. This has helped us lower our cost of logistics by allowing us to control more of the freight. Controlling freight means lower costs. This is critical to our business model of free shipping.
Margins are always thin in business with model numbers and this is no different for us. Even so, we have been able to cut operating costs in credit card processing and logistics. We also have improved our purchasing power since we moved into our new facility by stocking more of the profitable fast-moving items.
When creating your company culture, make sure that you include a way to make a profit by finding something that gives you an advantage over the competition.
We have outpaced our industry growth numbers by featuring the newest technology, ductless mini-split air conditioner systems, while most of our industry emphasizes central AC equipment. Year to date for 2019, we are up over 25% compared to last year, while our industry is even with last year.
Through starting the business, have you learned anything particularly helpful or advantageous?
Staying focused was the most important lesson I learned. We wasted time and money trying to be in too many categories in the beginning. We would hear a story about how well someone is doing in a different category and in the early days, we would look at entering that category. We used the rational “We are Total Home Supply” therefore we should carry everything for the home. This concept was not a good concept.
The real growth came once we focused on 2 categories, HVAC and Hearth products. It was painful to remove all those items that were not part of our focus, but the reality is we did not sell them. Once we accepted this premise, everything improved.
Along those same lines, we learned to focus on the areas of the business where we excelled and bring in help for the rest. It’s hard for a very small team to manage all aspects of a website and digital marketing. Things are constantly changing. It really helped us to grow when we brought in an agency that specializes in digital marketing. It allowed us to focus on the higher-level issues and allow them to work on the details.
What platform/tools do you use for your business?
We currently use BigCommerce for our shopping cart. We settled on BigCommerce after several failed attempts and lots of wasted money trying other alternatives, including a custom site.
BigCommerce is a hosted platform allowing us to focus on customizing the user experience rather than keeping the servers running. As our volume grew, we also began using Salesorder for order processing and inventory control. This has been a huge help and cut our order processing time by more than half.
We also added Groove HQ to serve as a shared inbox and keep track of all customer communications including troubleshooting and warranty claims. This tool has saved us considerable amounts of time.
Our accounting has always been on Quickbooks. We moved to Quickbooks Enterprise as our volume grew. We purchased the last of the perpetual licenses. This has now become a problem as Quickbooks will no longer support our software unless we go to their new SaaS version. This is not something we can do as we believe that you must always own your accounting software and always have access. This is the next area we need to look to change.
What have been the most influential books, podcasts, or other resources?
Being old school, most of my influence has come from relationships. I still meet with suppliers, other business owners, and support people to exchange ideas. I find I am better getting together with someone for dinner or drinks and discuss ideas, concepts or problems than using the newer type of resources such as podcasts.
I have many friends in completely different businesses. Surprisingly, you can learn a lot just by getting together or calling each other. It may be old school, but it works for me.
Advice for other entrepreneurs who want to get started or are just starting out?
If you are just starting, stay focused. The grass is not always greener on the other side. Start with your strength and stay with it until you establish yourself as a leader in your chosen category. It will be easier to expand the business later once you have established a proven base. You will also find it to be a great marketing tool to reach out to your previous customers when you launch a new category.
Another important fact is always finding a way to make a profit! This may seem like a silly statement, but many people put too much effort into volume and not worry about the profit. The old statement, “We make it up in volume”, does not work. Over the years I have seen many companies fall victim to this rule. When creating your company culture, make sure that you include a way to make a profit by finding something that gives you an advantage over the competition.
Are you looking to hire for certain positions right now?
At the end of 2018, we added a full-time employee for order processing. We recently added another sales and support person. With these two additions, we should be in good shape for the foreseeable future. These additions have allowed us to take on more tasks internally and to concentrate on our future growth.
The plan is to add more product lines in our core categories. We will stay focused.
Where can we go to learn more?
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- 4,818 founder case studies
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- 8,628 business ideas
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- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
- 4,818 founder case studies
- Access to our founder directory
- Live events, courses and recordings
- 8,628 business ideas
- $1M in software savings
