A Change in Services Proves to Be Right Move for Georgia’s Underground Systems

A move into directional drilling and an investment in equipment leads to rapid growth for Georgia-based contractor.

A Change in Services Proves to Be Right Move for Georgia’s Underground Systems

The team at Underground Systems stands in front of a Vermeer D24x40 drill being pulled by a Ford 750 with a mixing tank. From left, James Gomez, Paul Heine, Jacob Heine, CEO Dana Hood, Everett Skeen, Jeramy McGee, Jose Valtierra, Andrew Minnick, Jose Garcia, Sean Gwin, Gelsey Hood, Nick Young, Michael Hood, Scottie Skipper, Vicente Garcia, Adam LeClair, and Adrian Vargas. Not pictured: Larry Wilcox.

For a clear-cut illustration of how investments in new technology can kick-start established companies and help them break into a different — and more lucrative — market, consider Underground Systems, a company that primarily does horizontal directional drilling for telecommunications companies throughout metropolitan Atlanta.

But it wasn’t always that way. The story begins in 1991, when Dana and Tony Hood established a company called A-1 Installations, based in Buford, about 40 miles northeast of Atlanta. Its primary service was burying road-to-house service lines for cable television companies, using Case Maxi-Sneaker vibratory plows. At the time, every county in the state had its own cable-television provider, and the company eventually served as the prime contractor for various cable companies.

In 2005, however, Tony died unexpectedly. Moreover, after years of widespread consolidation in the state’s cable-television industry, there were just two competitors left. The result: fierce competition for laying cable lines, which led to diminished profit margins, Dana, age 53, explains. The business was changing, and Dana knew she had to make changes, too.

“I had two young kids at home and needed to continue the business to survive financially,” she says. “I knew I had to do something different.”

That’s where the new technology stepped into the picture and radically transformed the company. The tipping point occurred after Dana started dating Paul Heine, who now is the company’s president of field operations.

In a fortuitous twist of fate, Heine one day happened to see a work crew doing HDD. Curious, he stopped to ask them what they were doing and how much they got paid for doing it. The answer he got provided a crystal-clear picture of where the company should head next: installing water and power lines using trenchless technology.

“We bought our first directional drill in 2012 and eventually walked away from doing cable drops with vibratory plows,” Dana says. “That was a turning point — when things really took off.

“The industry paid better because it wasn’t beaten down, like in the cable industry,” she continues. “And only a few other companies were doing it (trenchless installations) at the time. Plus, demand for replacing water and power lines was just starting to grow. We hit it at just the right time.”

Today, just six years after investing in HDD machines, the company — which Dana renamed Underground Systems — is a multimillion-dollar-a-year company in terms of revenue. It employs 18 people and owns HDD and other related equipment worth more than $1 million.

“We’ve purchased a new (directional) drill every year since then and doubled our sales every year,” Dana says. “We even bought a new building at the end of 2015 in Suwanee, right down the road. I was nervous that it was too big for what we needed, but we’re already outgrowing it.”

SUCCESS FACTORS

While the company’s focus on investing in productivity-enhancing equipment contributed strongly to its rapid growth, other factors came into play, too. Take establishing good credit, for starters. Dana says the company bought its first HDD machine on credit but dutifully paid it off in one year instead of four. That helped it establish a sound credit record that made it easier to purchase additional machines on credit. “You can’t do it without good credit,” she notes. “I always made sure we had good credit.”

Heine and Dana also constantly assessed new business opportunities and took calculated risks when buying new equipment that would be needed to handle additional customers. “We’d say, ‘If we can get a bigger machine, we can get X amount of work from this company and so forth,’” Dana says. “Paul does a lot of research, then we run the numbers and figure it out.”

Providing top-notch customer service also played a role. In essence, Heine says customer service centers on a single simple principle: Just do what you say you’re going to do when you say you’re going to do it. But it also means doing everything legally, with permits and locates — something that fly-by-night outfits don’t always do — and thoroughly cleaning job sites when projects are complete.

Furthermore, the company doesn’t do without double-checking line locates via potholing. “It seems like 90 percent of locates aren’t correct, so we do potholing to make sure they’re marked correctly,” Dana explains. “And if they’re not, you call someone. We’re not out there constantly cutting utilities. You do that and the Georgia Public Service Commission will fine you. We know that not everything is marked or marked correctly. We don’t want to get fined or hit anything, so we double-check everything.”

GREAT EMPLOYEES ARE KEY

It also helps that the company has been successful in hiring qualified employees, then retaining them long enough for them to gain valuable experience — develop that sort of a sixth sense of where underground lines might lurk or take an unexpected bend or turn.

“This isn’t the kind of company where one guy digs a hole and five guys watch him,” Dana notes. “We have professional people who are experienced and know what they’re doing. A good group of guys out there who get the job done and do it well. If they run into problems, they can fix them and still get the job done. Our employees are what sets us apart from fly-by-night operations.”

Heine also credits assistance from an industry veteran, Larry Rodgers, the owner of HDD Inc. in Tallassee, Alabama. The two met at a local Ditch Witch distributor in Atlanta around 2011, and now the two companies partner up on various projects. “He has larger drills than we do, so he can do larger-diameter pipes,” he explains.

“It’s always great to be able to bounce ideas off someone with more experience,” Heine adds. “Larry is always very bashful about his expertise — says he’s here to help. But he’s great at providing tips for how to approach certain shots and things to look for.”

For example, Heine says he once asked Rodgers how he’d handle a challenging job that required drilling a 600-foot-long bore about 15 feet below a wetlands area on the northern outskirts of Atlanta. The bore was needed for an 8-inch-diameter HDPE forced sewer line. “We were concerned we’d lose the hole because of the wet soil,” Heine notes. But a talk with Rodgers confirmed his hunch that drilling out with a 4-inch-diameter head, then jumping right up to a 16-inch head (and bypassing an intermediate-sized, 8-inch head, in order to save time) would be the best approach.

“It took us a day and a half, but it worked,” Heine reports. “The biggest challenge was making sure the hole wouldn’t collapse while pulling the pipe through the bore. There was no way to get out there and test how deep the swampy soil was. It’s a bit of a guessing game. You need a little luck along with experience. You have to watch the mud coming out and hope you see red Georgia clay, not the dark, mucky stuff.”

GOOD EQUIPMENT DRIVES GROWTH

Consistently reinvesting in equipment that enables employees to work more efficiently and boosts profit margins has been integral to the company’s success.

The firm currently owns five directional drills: three built by Vermeer (24x40, 23x30 and 20x22 models) and two manufactured by Ditch Witch (models JT922 and JT520).

The company also owns a trailer-mounted VX500 vacuum excavator made by McLaughlin (a company owned by Vermeer); three mini-excavators made by Yanmar America, Kubota, and IHI Construction Machinery (owned by KATO Works); three locators made by Radiodetection and two made by Digital Control and Underground Magnetics; an RD1100 ground-penetrating radar unit built by Radiodetection; and Hytera two-way radios.

The high-performance two-way radios come in handy when Underground Systems crews are stretched out on a road for miles while pulling fiber optic cables into conduit. The company used to utilize cheaper technology but found their range was inadequate.

“The ability for everyone to communicate and hear what’s going on instantaneously was a big game-changer,” Heine says. “For example, when it’s time to quit for the day, everyone’s on the same page. It’s much faster than making a lot of phone calls back and forth to crew leaders.”

MAINTAINING PROFIT MARGINS

What’s the key to boosting profit margins? Closely tracking expenses and making sure employees are productive, Dana says. The latter underscores the importance of continually investing in reliable, more efficient machinery — not to mention hiring good employees, too.

“It’s always a matter of volume,” she points out. “So when you have good weather, you’ve got to get out there and put pipe in the ground because soon enough, you’ll have two days of bad weather where you can’t work or the locates are wrong or a piece of equipment tears up. Nonproductive days are going to happen, so when the weather is good, you have to be sure you’ve got a good crew out there and get some footage in.

“Good employees are the biggest big part of it,” she adds. “When you have employees that care, they see that something needs maintenance and they do it. That helps maintain good profit margins more than anything.” How does the company foster such a culture? By not micromanaging employees and providing them with good equipment and tools, which helps build mutual respect.

“It’s hard to find people like that,” she admits. “But we’ve been pretty lucky. The majority of our employees are referrals from existing employees; and some of them have been with us for more than 10 years now.”

Last but not least, being on the forefront of technology helped Underground Systems establish a solid reputation, which in turn made it harder for competitors to enter the market. “Now there are about 10 more companies (that do directional drilling) that have come along in the last five years,” she says. “But we’re still No. 1 because we provide good service and our name has been out there for so long.”

MORE GROWTH EXPECTED

For the foreseeable future, Dana expects continued growth for the company, as well as some diversification. “That way all our eggs aren’t in one basket,” she notes. Moreover, she expects that eventually, the fiber optic cable boom will end, forcing the company to consider other local markets. “I’m not a big fan of having employees go out of town to work, so I’d like to expand into other services where we can stay local and still be a profitable company,” she explains.

In the long term, Dana expects her son and daughter-in-law, Michael and Gelsey Hood, to take the reins when she and Heine retire. Michael currently works for the company as a crew foreman and Gelsey is Dana’s assistant, handling duties such as payroll and invoicing. Paul’s son, Jacob, also works for the company, handling welding and other duties out in the field, and Gelsey’s brother, Andrew Minnick, performs small waterline bores, she says.

Dana also is working on developing a better benefits program for employees, including a retirement savings program to complement health and life insurance plans already in place. “This company has grown into something bigger than we ever expected, so we want it to benefit everyone because we’re a team,” she says. “We can all be successful only by working together. We can’t do it without them, and they can’t do it without us.”

The acronym for Underground Systems is “us,” as in management and employees. In fact, the shirts that are part of employees’ uniforms says, “You’ll have no problems when you deal with US.”

As Dana looks back, she still marvels at how much the company has grown — and at the potential that lies ahead as a new generation prepares to take a leadership role. “When Tony and I started out, all we were hoping for was to make enough money to have a nice house and raise our kids and go on nice vacations,” she says. “We wanted to avoid struggling and living paycheck to paycheck. And now it’s turned out to be more than I ever dreamed possible.”


From potholing to cleaning drainlines, versatile machine gets the jobs done

It didn’t take Paul Heine long to recognize how valuable a VX500 vacuum excavator could be to Underground Systems.

“We rented one for a job about two years ago,” says Heine, the president of field operations. “We used it once, and a week later, we went out and bought one.

“There are times on larger jobs when we rent a large vacuum truck (with hydroexcavating capability) for potholing, but for most jobs, this one does the trick,” he continues. “It’s a really neat piece of equipment. I call it my $40,000 vacuum cleaner.”

The VX500 is made by McLaughlin (owned by Vermeer). It features a 500-gallon spoils tank, a 400-gallon water tank, a hydraulically driven rear-hatch door for gravity-fed waste removal, and a rotary blower (575 cfm) built by Roots blower from Howden, including a reverse-flow option. “We wanted a 400-gallon water tank to reduce refill trips,” he notes.

Crews often use the machine for potholing to expose utility lines before commencing with directional drilling. But they also use it to vacuum up mud that collects in drilling pits during back-reaming and to clean drainlines in hard-to-access places, such as parking decks.

“We even use it to suck string while proofing the ducts (conduits for fiber optic lines) to check for proper alignment and to find any obstructions,” he adds. Employees also use the VX500 to clean mud and other debris from ducts that have been sitting empty for a while, pending installation of fiber optic lines, Heine says.

“Everybody wants this machine on their job,” he says, noting the unit’s popularity among employees. “It’s well-engineered, reliable and very easy to maintain — basically just change the oil and keep the filters clean. It’s a very handy machine.”



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