Anuj Khanna, CEO of Service 1st Financial

This episode of CEOs You Should Know features Anuj Khanna, CEO of Service 1st Financial.

Episode Transcript

(00:00):
So I was born and raised inthe great state of Delaware, spent most
of my life there up through highschool, and then I went to college
at the University of Pennsylvania in Philadelphia, Pennsylvania, and then went to graduate
school at Northwestern University in Chicago.So we're going to talk a lot about
your company and over the last fouryears of service, first financial, but

(00:21):
I think to give context to ourlisteners, what was I like to find
out? You know, what youdid out of school, what you were
interested in, and then you getthat epiphany of an idea about starting your
company. And it's really hard tostart a company, whether it's a small
or large business out there for ourcurrent entrepreneurs and CEOs that are listening and
also the future ones. So whatwas the plan right out of school?
Would you do? Yeah? SoI spent most of my current Wall Street

(00:43):
as an investment banker and then lateras a private equity investor. I actually
have a legal background. Have spentmost of my career investing in and lending
money to distress businesses with the ideaof helping them to improve the businesses and
eventually, you know, exit thoseYou know what brought me to the home
services industry was In two thirteen,I led an investment where we bought the
second largest home services contracting platform inthe country from one of the large HVAC

(01:07):
original equipment manufacturers. I spent aboutfour years knee deep in that business helping
to turn it around. Successfully exitedthat business to a publicly traded company in
Canada. And in Canada, themarket for home comfort's very different than the
United States. It's a very largepercentage of population does not own their systems.
They actually rent them. When Isay their systems, I'm referring to
HVAC and plumbing systems. And youknow, given the change in consumer purchasing

(01:32):
behavior here in the United States towardssubscription and subscription like services, I said,
you know, I think there's abig opportunity to help the industry,
the home comfort industry start selling whatconsumers really want, which is comfort as
opposed to large, expensive systems thatthey don't really care about. All Right,
So I love to hear stories likethis. It's that idea, and
you've kind of started that about whyyou came up with the company, But

(01:55):
there's a lot that goes behind that. Once again, for our future leaders
and entrepreneurs and CEO. I've gota great idea. Here's what I'm going
to try and execute it. Let'sgo. And there's a lot behind that.
So tell us about the origin ofkind of coming up with the idea,
starting it, what was execution lightit's in those first few weeks and
months. Yeah, it's an interestingstory. So you know, as I

(02:16):
mentioned, my experience in the homecomfort space really paved the way from my
understanding of where there were some gapsin the current business models. And I
started, and I'll say this lightly, with a PowerPoint presentation in a spreadsheet.
I built a financial model PowerPoint presentationlaying out the business, and I
went to New York and I talkedto two investors. Now again my background

(02:38):
is from that world, so Ithink that made it a little bit easier.
I knew I was onto something whenboth of the first two investors I
talked to said, we'll give youthe money to go build this business with
scratch. We you know, Ispent six months negotiating, and then in
November twenty nineteen, we closed onour first call it incubation capital from a
firm in New York. And Iremember I hired you know three people that

(03:00):
I had worked with in the past. We sat in a conference room here
in Bethesda, Maryland, and welooked at each other and said, we've
raised the money. Looks like wehave to go build the business now.
And we literally started building from scratch. Someone took on the IT side of
it. I handled the legal,all the legal work. We hired a
head sales trainer who built the programout and over a course of six months
we built the infrastructure both from atechnology and legal perspective. And in the

(03:23):
middle of COVID April twenty twenty,we originated our first premiere program, long
term Worry fore home Comfort program contractwith a consumer in Oklahoma. Wow,
that's that's a great story. Ilove that. And right drink COVID too.
In the middle of COVID, notthat we had planned that when we
raised them Mode Home course. Shortlyafter, yeah, three months after we
raised it, you know, theworld fell part. Yeah, had a

(03:45):
lot of we pushed on and alot of pivoting after that for a lot
of businesses out there, even thougha lot of people worked remotely anyways to
start with. So I do wantto talk a lot about the company,
and I'm always curious about names ofcompanies because I know that's fun. Sometimes
you want to say who you areto your client out there and kind of
get people's attention. Can you tellus the origin story of the name of
the company. Yeah, you know, it's interesting. You know this the
industry, the home comfort industry.And when I again, when I say

(04:08):
home comfort refer mostly h VAC,plumbing, and electrical. The industry has
been selling you know, boxes andtanks to homeowners for decades. Right,
my system's broken, my house ishot, Well, here's a box.
This is going to help keep youcool. And then the genesis of service
first was consumers don't care about theboxes. They care about the service,

(04:30):
So let's give them service first,okay. And then the financial part of
part of it was built in therebecause you know, you know, in
the end, we are a financingcompany that finances a homeowner's you know,
acquisition of systems, but then webundle it with a full array of services
to make that experience world class.I like that. That's very well thought

(04:53):
out and very cool. We're goingto talk about those in a second,
but I did want to ask youabout simply the mission statement. What is
that from the company. Yeah.So, the mission for the company is
to transform the way both contractors andconsumers purchase home comfort in the United States
from a product based sale to asubscription like service. All right, anad,

(05:14):
let's do this. I want togive everybody kind of a thirty thousand
foot view of your company. Ifthey've been listening and Service First Financials the
first time they've heard this. Ifyou were to give them an overall view
of what you do and who youwork with, what would that be?
Yeah? Sure, so Service forus as a financial, technology, innovation
and training company that's transforming the wayhomeowners stay comfortable in their homes. Through

(05:39):
our network of or national network ofhome services contractors, we provide a comprehensive,
worry free home comfort solution for homeownersin place of buying a new system.
Our Premiere program includes HVAC, tankand techlis, water heaters, water

(05:59):
fil train and purification, and standbygenerators. And for a low monthly payment,
homeowners can get access in use toa high efficiency home comfort system with
no cash out of pocket and noneof the risks and burdens of product ownership.
If the system ever breaks, it'staking care of free of charge of
that homeowner. Our authorized contractors comeout once or twice a year to perform

(06:20):
annual maintenance to ensure those systems areoperating, get peak efficiency, keep utility
bills down, and the homeowners paya low monthly payment and they know exactly
what to expect every single time ofcontractors in their home. All Right,
you've been around for a while,and I always like to talk to our
leaders about sustainability and then growth becauseeverybody's got a different opinion, depends on
if you're a small business, mediumor large and what you do for a

(06:42):
living in who you work with.With all that said, tell me about
starting the business, being sustainable,then growing and are you within the DMV
and are you working domestically tell usthe story. Yes, absolutely so.
Our business today's a national footprint.We're operating in about thirty three states across
the country. We did we workedthe business here in the Washington, DC
area, so we have a littlebit of a concentration around DC, Maryland

(07:05):
in Virginia. But it is anational footprint. And you know, we've
built this business to be a businessthat's going to be here not only tomorrow,
but five years from now and tenyears from now, you know,
serving our customers and serving our contractorsin a way that no other business in
this industry is doing today. Youknow, from a sustainability perspective, I'm
going to shift it a little bitto the environmental sustainability. We have a

(07:28):
big focus on, you know,helping to drive decarbonization in the home comfort
space. Okay, about forty percentof our portfolio today is an electrified heat
pumps, and as many people mayknow, there's a really big push today
towards electrifying home comfort and the homesby removing fossil fuel burning, applying SYS
from within the homes. So manya big portion of our portfolio, about

(07:50):
forty percent, is really promoting thatand we're seeking to grow that segment of
our business going forward as well.Outstanding and aj I did want to ask
you a little bit about differentiating yourself. And I don't want to assume that
anybody out there does exactly what youdo, but I'm sure there is competition.
So as you're pitching yourself, you'retrying to sell the other clients,
you're starting to grow that business,how do you differentiate yourself from the other

(08:13):
competition out there? Yeah, youknow, I think it's an interesting it's
an interesting question. We played along game, okay, And what I
mean by that is, you know, this program is not for every consumer.
It's not for every contractor that wantsto come onto the program. We
really seek to understand our customers andto figure out is now right time?
Is this program right for you?But most importantly, we differentiate ourselves by

(08:37):
the support we provide. I mentionedearlier that we're a financial, technology,
innovation and training company. Training isa huge portion of what we do.
Okay. This industry, both froma consumer perspective and a contractor perspective,
does not necessarily understand how a servicebased model for home comfort works at the
kitchen table, and so we do. When we onboard a new contractor,

(08:58):
we train them on site. Wefly all over the country and train their
their personnel on how do you presentthis to a homeowner and decide whether this
is right for that homeowner or not? And how do you talk through the
value proposition of this versus other waysof acquiring home comfort? Well that's why
say training, yea, training isprobably the biggest one that's absolutely fascinating,

(09:18):
And I guess that leads me tomy next question, and once again I
don't want to make any assumptions,but when it comes to small, medium,
and large businesses that you do thistraining work with them, is it
all for grabs or do you liketo center around a certain type of business.
Yeah, So we typically are authorizedcontracting network across the country. Is
typically represented by the biggest and bestcontractors in each geographic market. Okay,

(09:43):
And the reason for that is there'sreally a few things. One we believe
this type of program requires a levelof sophistication and business understanding that typically not
always, but typically your mid tolarger size you know, home services contractors
have your smaller ones tend not tohave. Okay, Okay, that's the

(10:03):
first thing. But we do workall across the country, and we work
in even big markets in small markets, but we just tend to partner with
in whatever market it is a marketleader within that market. Okay, got
it. Well, let's do this. I always like to get a great
story because you know, one ofthe things that entrepreneurs and CEOs and founders
like to share is something special that'shappened. So I want to put a

(10:26):
pin in that just for a second. But let's have a good story just
a few minutes here, maybe witha client to somebody trained, there's something
special where you say, you know, that's why we get up in the
morning. We did pretty good here. But before that, your industry,
what kind of challenges are you workingwith right now? Yeah, you know,
it's interesting the home comfort industry overthe last you know, called two
to three years since covid, hasexperienced outsized inflation on equipment costs, okay,

(10:52):
and so homeowners that maybe haven't replacedan HVAC system or water heater in
the last five, ten, fifteen, twenty years are shocked when they see
the price of a new home comfortsystem okay. In a lot of ways.
Simply put, home comfort has surpassedand broken through an affordability threshold for

(11:15):
most Americans. And so that's whereone of the biggest challenges and opportunities is
for our business, is that we'remaking it easier for homeowners to buy the
systems that they want, the highefficiency, sustainable systems that they want,
as opposed to what they think orthey may believe they can afford. Okay,

(11:35):
Not only that, but then we'resupporting that installation of that system with
all of the services that you needthroughout the useful life of that system to
ensure that it's operating a peak efficiencyto keep utility bills down. Makes sense.
I'm glad we talked about that.All right, let's do a little
story time here. I'm sure there'sbeen a handful of great stories out there
where he said, you know what, team, we knock that one onto
the park for the client to maybewith a training session or something special happen

(11:58):
with that client. Do you havea nice story for us that you'd like
to share. Yeah? Absolutely,you know, it's an interesting, interesting
question. One of the things Itake a lot of pride in is that
we do things differently than most othersimilar companies in our industry. Okay,
I'll give you example. First,we go on site to train all of
our dealers. Most people don't dothat in this industry today. Okay,

(12:22):
if you're a vendor, you sendthem a a zoom link, you do
some training over the phone, maybeyou go on site once a quarter.
We're out there a lot helping ourdealers be successful with this program. We
hear numerous times from our dealers thatthe level of preparation, the presentation,
and the content and quality of thecontent that was delivered is better than any

(12:43):
presentation that they've ever received from avendor in their twenty thirty forty years in
the industry. And if that wasonly once we had heard that, I
wouldn't put a lot of stock intoit. We hear that from very large,
very sophisticated contractors on a regular basethis month after month, because we
focus on that aspect of our business, you know. I My takeaway from

(13:05):
that is a couple of things.Outstanding customer service, but also real time
in person training where that's you're alsodifferent engineering yourself from the other companies out
there, and that's kind of meana lot to the people you're working with
and just the overall chatter about yourcompany that you go that extra mile to
get people trained up properly in person, that's kind of the extraordinary and very

(13:28):
smart on your part too. Yeah, you know, it's it's it's a
double edged sword, right, becausewe do that. We have to be
selective on who we work with,sure, because it's just impossible for us
to be everywhere at every time andthe other and if I may expenses too,
right, exactly, Yeah, wehave to be selective because you know,
we can't. We can't spend thattype of money and time, you

(13:50):
know, serving smaller opportunities. Butthe other side of that is when we
do work with somebody, the levelof support and training and customer service,
as you mentioned, is really onthat outstanding. Well, let's do this.
Let's wrap up our conversation with somefinal thoughts about you and as you're
about the company. And once again, if somebody is being introduced to Service
First Financial for the very first time, what takeaway would you like them to

(14:11):
go away with today? Yeah,you know, from a from a consumer
perspective. You know, if aconsumer is in the market or facing a
difficult situation with their home comfort,their HVAC, plumbing, or electrical and
they're looking for a convenient, worryfree way to replace their systems, I'd
encourage them to go to www.Dot worryfreehome Comfort dot com and explore watch

(14:35):
the explainer video about our program andsee if it's a good fit. If
it is, fill out the formand we'll have one of our authorized contractors
reach out, you know, tocome out and give a quote for whatever
their needs may be. And forcontractors, you know, I think it
really comes down to if you're aninnovative contractor seeking to differentiate your business and
your local market, seeking to beforward thinking and serve your customers at a

(14:56):
differentiated level relative to the competition.Again www dot Worry freehome Comfort dot com.
Click on the contractor link learn alittle bit about what our program can
do for you as a business andfor you, you know, while you're
starving your customers. Outstanding And onelast thing, Ina before we let you
go. I always like to askour leaders about not only leadership but starting

(15:16):
a company. Now. We,as you can imagine, have a lot
of current CEOs and entrepreneurs that listento this series, but also a lot
of future ones that love to getinto whatever they're going to do for a
living. And I know that yourperspective is your business, how you came
up with the idea, how youexecuted with your team, and how you're
sustaining it and growing it. Withthat said, any advice or young people
out there that are starting whatever kindof business they want to do, just

(15:37):
about moving forward in today's climate.Yeah, you know my view as a
founder and a CEO that is nota title of leadership or management. I'd
encourage anyone that's seeking to start somethingor lead an organization to be willing to
do every job within that organization atsome point in their tenure. Okay,

(16:02):
there's not a single job with this, within this organization that I haven't done
myself so far. Okay, fromthe very beginning till now, I'm willing
to do whatever it takes, andwe hired the types of individuals that are
willing to do whatever it takes tobe successful. We always tell people that
what we're trying to do is changein industry. Changing an industry is hard.
You will run into walls. Okay. We want people who are willing

(16:25):
to go over it, through it, around it, under it, whatever
it takes to get past the obstacleand move on to the next challenge.
And so i'd encourage people that arelistening to this, if you're a CEO
or a leader, do every jobwithin the organization for some period of time
so that you understand what it takesto be successful. I'm so happy you
talked about that and you and Iare on the same page. I've been
in my industry with TV radio sportsfor a long time, and I extinctively

(16:49):
made sure that I did everything behindthe scenes before I got that big job
on the air that I wanted todo. My daughter is also in cinema,
television, arts and school right now, and I said, I know
you want to be a director ormaybe a DP, but do the lighting,
do the blocking, do the audio, do all the things around.
So when you're a director someday you'llknow what everybody else is doing. It'll

(17:10):
be an easier life for you,no doubt. Yeah, hey, listen,
this has been a lot of fun. I should talk to you.
You're obviously very passionate about your businessin a short amount of time. The
growth is incredible. Nice to seea guy locally doing very well for what
you do. And we can't appreciateenough for your very busy schedule to join
us on CEOs of Shanel continued success. Yeah, thank you so much,

(17:32):
appreciate it.