Mike Kahoe drives toward $100M at Group Management Services


The hustler

Rather than give in to his detractors, Kahoe opened up a phone book and got to work.

“I woke up in the morning and I started calling,” he says. “I started calling tree trimmers first, for some reason, and I was just calling, begging for an appointment. I’m sure it was a horrible cold call because I was just stumbling my way through it. I’d never cold called anybody before, but I had to do something to get customers and that’s the only way I could figure out to do it.”

After a couple hundred calls, he landed a four-employee tree service run out of the owner’s house as his first customer.

Now with enough money to pay rent, Kahoe had the confidence to stick with it and started landing a customer each month. As business picked up, he reached out for help.

“I hired a lady from the bank,” he says. “She was a teller. She was always nice to me, so I hired her.”

That spring, with business picking up, Kahoe went on a cold call to a 50-employee roofing contractor.

“The guy really liked me, and he told me he wanted to come and check out our operation,” he says.

Except Kahoe didn’t have an operation. He was dialing for dollars from a duplex. Rather than let a sizable sale slip away, Kahoe took another tact.

“I signed a lease on 2,000 square feet for two years, and then I went to OfficeMax and I bought all the furniture,” Kahoe says. “I stayed up for, like, four days straight putting together office furniture. Then I realized that I didn’t have anybody working there, so I called my friends and told them to get dressed up and show up at my new office and pretend like they were all salespeople and service reps.

“So the guy came in and I introduced him to all my buddies, and as we walked him to his car he was like, ‘You guys have a pretty impressive operation here, Mike.’”

Though he won the business, Kahoe had suddenly strapped himself to significant overhead expenses. His lease payment was $1,500 a month, or about seven times his rent. It was, however, great for Kahoe, who operates best with his feet to the fire and no way out but to run through the flames.

The sales and retention treadmill

Timing has seemingly been on Group Management Services’ side. Outsourcing became the trend as companies looked to mitigate risks, which made the legal arrangement between employers and PEOs, which splits the legal responsibilities of “shared employees,” convenient and popular.

By 2000, about four years after Kahoe won his first customer, GMS reached its first $1 million in sales. The hire of Tim Austin, a friend from college, a few years later, accelerated that growth.

Austin, who from Kahoe’s description is a sort of the superego to Kahoe’s id, established a meticulous, structured and scripted cold-calling sales process for GMS. It became the spiel sales reps would give 50 times a day, a spiel that on average leads to six new business appointments each week, of which five will actually happen. Two of those will advance to the proposal stage, working out to about nine proposals each month. And from those nine proposals, GMS can expect to close one customer.

With its new approach and opportunities abound, sales revenue was growing exponentially, into the tens of millions of dollars. Though the company was killing it in the sales acquisition phase, in the client retention phase, it was not … killing it — or really even paying it much attention.

The exit of the company’s vice president of client services shone a spotlight on a retention issue.

“When she left, we realized that we had a problem — that we’re losing 20 percent of our customers every year,” Kahoe says. “Then you have to sell 30 or 40 percent more just to show some growth.”

Kahoe patched the hole with Stacey Larotonda, now the vice president of client services. He says she started tracking retention and publicizing it within the company, and grading account managers based off of the retention of their customers.

Also helping on the retention end was a shift from selling savings to selling services, and implementing a structured training program so account managers were better at servicing the accounts.