Home safe | Alan Mooney has built Criterium Engineers into a national powerhouse one home inspection at a time

The classic stereotype of the engineer doesn't quite mesh with the typical personality type of the entrepreneur. One's a nerdy number-cruncher with a pocket protector while the other is bold, shrewd and aggressive. Engineers, in other words, are usually better suited to building bridges than building businesses. At least that's the perspective of Alan Mooney, who happens to be both a licensed professional engineer and a successful entrepreneur.

"There are a lot of engineers who want to run their own business, but engineers are inherently risk-averse people," says Mooney, President of Portland-based Criterium Engineers.

Mooney, with his company's business strategy, has found a way of making those opposing tendencies work together. Instead of starting a business from scratch, licensed professional engineers, or PEs, can approach Criterium and ask for a hand. That has allowed, for example, Dave Pioli to open Seattle-based Criterium-Pioli Engineers in 1973, Louis Maillet to open Criterium-Maillet Engineers last year in Fort Collins, Colo., and nearly 70 other engineers around the country to open their own engineering firm with the Criterium name over the last 50 years.

"I always wanted to open my own business and doing it this way gave me a chance," says Gary Caruso, who opened Criterium-Caruso Engineers in Alpharetta, Ga. in 1991.

Mooney describes Criterium Engineers as "a small, quiet company based in Portland, Maine," noting that its base location in a fairly small city and behind-the-scenes work ˆ— the company largely performs building inspections ˆ— doesn't tend to attract a lot of attention. And locally, Mooney's perhaps known better for his role as the principal in Criterium's Maine office ˆ— Criterium-Mooney ˆ— rather than as the president of a much larger national company.

He admits, though, that he sometimes wishes fellow Mainers were more aware of his company's national presence. "It can be frustrating," he says. "It's disappointing how we can't always convey to people what we're accomplishing outside of the state."

But nationally, Criterium does stand out. The company is the nation's only engineering franchise, and is joining the ranks of the largest engineering and design firms in the country. Industry publication Engineering News Record, which each year compiles a list of the top 500 U.S. engineering and design firms, placed Criterium at 436 last year, up from 476 in 2005. The company's revenues amounted to $23.4 million in 2006, and its 71 offices employed more than 300 people.

The core of Criterium's business has traditionally been residential home inspections. Hiring a professional inspector to examine a home is increasingly becoming an integral part of the home-buying process ˆ— a way to avoid being stuck with a lemon of a house. The service provides a steady flow of work for Criterium offices, but Mooney has a vision of growth for Criterium that residential inspection services alone can't fulfill, especially in the face of a struggling housing market.

Mooney's goal is for his company to double its size in the next four or five years, pulling in about $40 million in annual revenues. To sustain the firm's growth, Criterium is broadening the services it provides, branching out into new markets. The firm made a name for itself in the home inspection business, but as the real estate and home building industries change, Mooney is seeing ˆ— and chasing ˆ— new opportunities. If those opportunities continue to hold promise, and as more engineers see opening a Criterium franchise as a practical means of opening their own business, Criterium may be positioned to achieve the growth Mooney envisions and earn the small, quiet company in Portland's Monument Square even greater national, and local, prominence.

Avoiding the sink hole
Alan Mooney is intimately familiar with thousands of Maine homes in a way that only an engineer can be. He says he introduced the concept of home inspections to Maine in 1974, and along the way has delivered news both good and bad to countless prospective homeowners. He's exposed shoddy shingling jobs, improperly braced roof trusses, incompletely sealed window frames, rotting siding and just about any problem that could turn what may look like a perfectly decent house into a financial sink hole. At one point Mooney could actually tell you exactly how many houses he had inspected in his career.

"I've personally looked at over 15,000 houses," he says. "I stopped counting at 12,000 and that was a long time ago."

Home inspections were unheard of in Maine before 1974, but before 1957, they were unheard of anywhere in the United States. Then a New York engineer named Arthur Tauscher opened an office that offered engineering reports on buildings before they were bought or sold ˆ— focusing mostly on residential structures. It didn't take long for the concept to draw clients and for the business to build momentum. Eventually, the business became known as Home Inspection Consultants.

Soon Tauscher was hiring other engineers for his business and figuring out a way to expand it to other regions of the country. He decided the best way to achieve that would be to sell the company's license to other engineers so they could open offices in other cities. Mooney, a recent transplant from New Jersey, bought a license from Arthur Tauscher in 1974 and opened Home Inspection Consultants of Maine in Portland. "At the time I was young and foolish and ambitious enough to take on the whole state," Mooney remembers.

Mooney found plenty of interest in home inspections in Maine, and for a few years the business flourished. The economic recession of the early 80s, though, posed a serious challenge. For most of that period, Mooney kept up Home Inspection Consultants of Maine on a part-time basis, balancing it out with his engineering office, H. Alan Mooney and Associates.

But after the market had improved, Mooney focused his energies once again on his initial business connection with Arthur Tauscher and even made a deal with him for first refusal if he sold the business. In 1988, Mooney got the chance to exercise that option, buying the company, including each of its 37 offices. He soon changed its name to Criterium Engineers, evoking the business's emphasis on standardization in its services.

Since Arthur Tauscher started the business in 1957, and even more so since Mooney bought it in 1988, home inspections have become increasingly common ˆ— and to some real estate agents and home buyers, essential. The National Association of Realtors and the American Society of Home Inspectors report that at least 70% of homes sold today are inspected before the sale's close. Especially during the housing boom of the last several years, as prices soared, buyers realized more and more the importance of having all the information they could about what is often the biggest investment of their lifetime. At first, inspections were mostly done for older homes that may have developed problems over the years, but more recently, people want even brand new homes to be inspected, to ensure there are no major flaws in their construction.

As demand has grown for home inspections over the years, many companies have emerged throughout the country offering the service and creating competition in the industry. But Criterium, extending back to its roots, has something to set it apart from most of those firms. The home inspection industry is lightly regulated, and in many states, including Maine, just about anyone can offer the service, regardless of how much expertise they have. Since its beginning, Criterium has been operated by licensed engineers, meaning its principals have spent four years in college studying engineering, four years working as an engineer, and have passed a rigorous two-day, 16-hour-long exam.

Since buying the company and renaming it, Mooney has sought to capitalize on Criterium's reputation for engineering expertise and ensure that it's not lost. Not just anyone can open a Criterium office. Besides being a licensed engineer, a prospective franchise-owner must undergo a thorough two- to six-month application process that includes visiting the Portland offices for interviews, paying a $29,000 franchise fee, undergoing a week of training in Portland and agreeing to open in one of the markets Criterium's corporate office has targeted. (Currently, Criterium is eyeing roughly 140 markets in the United States and Canada.)

Once the business is initiated, Criterium requires a monthly royalty fee of six percent of revenues and another one percent to cover communications costs. In exchange for those fees, says Gary Caruso, who opened Criterium's Georgia office in 1991, "they offer a lot of support. In the beginning there was a lot of communication with Portland, on a day-to-day basis. It can take a several years to really get going, but we had a good bit of business right off the bat. They had a lot of connections down here and gave us a lot of referrals."

Like most franchises, Criterium's business model depends on consistency, reliability and standardization. That has appeal for clients, Mooney says, but using one business template that has been proven effective also makes running a business much simpler and more cost effective. For example, instead of each Criterium office starting its own website and forming its own library of engineering materials, the office can just plug its specifics into a standard website the corporate office has developed and access a database with abundant informational resources.

Criterium offices have come and gone over the years, but for a franchise, annual turnover is low ˆ— around five percent.

"Most of the offices that have closed did so because of personal reasons, like retirement," says Mooney. "There have only been two offices that tried and just couldn't make it."

According to Caruso, who learned about Criterium from an article in a trade magazine, the franchise model strikes a balance that appeals to many engineers.

"That's the attraction ˆ— you can work independently, but still have them there for support," he says.

Great expectations
Gary Caruso estimates his office in Georgia gets about a third of its business from residential home inspections, with the rest a mix of consulting, commercial building inspections and other services. That mix reflects changes in Criterium at the corporate level. Over the years, Criterium has evolved from being centered on home inspections to applying its expertise to a great variety of services. Mooney says for the company as a whole, residential services amount to about half of the company's business.

"Home inspections are a good niche because not many engineers focus on them," he says. "But there's a good kind of cross-pollination in doing all these different things."

With the commercial real estate market booming in recent years, Criterium has found abundant opportunities for commercial building inspections.

"I like to say we were on the cover of The Wall Street Journal," says Mooney.
Criterium's name wasn't on the cover, but a multi-billion dollar transaction involving 30 pieces of real estate Criterium inspected was ˆ— one of the company's largest contracts ever. And similar contracts are now common for Criterium. Mooney says the company has worked with every major real estate firm in the country to give an engineer's stamp of approval to transactions involving enormous sums of money.

The newest service Criterium is offering is its quality assurance program, which allows the company to become involved at a different stage of a house's life ˆ— its construction. Since teaming up in 2004 with Quality Built, a California firm specializing in residential construction quality assurance, Criterium has monitored the construction of thousands of houses, providing documentation of quality work that mitigates the risk of any litigation down the road. Mooney thinks the service is positioned to become more widespread and lucrative. Last year, about 18% of Criterium's sales were derived from the partnership with Quality Built.

"Construction litigation has exploded in the last 10 years," he says. "Contractors are worried because developers set up these limited liability corporations ˆ— an entity that's dissolved after the project is over. That leaves the contractors as the target for any potential litigation."

Mooney says one trend he's seen develop during his career has been the soaring expectations of homeowners. "They expect to buy the perfect home," he says. The low tolerance for any flaw in a house has led to an abundance of infuriated homeowners and lots of lawsuits, says Mooney. For many years, Mooney and other Criterium engineers have served as expert witnesses in such lawsuits and as consultants to both plaintiffs and defendants during litigation.

But Mooney says he would rather work to make sure that such lawsuits never have to happen. He hopes that Criterium's recent collaborations with some of the country's largest home builders will open a new and lucrative market for Criterium, while serving the interest of homeowners and builders. Mooney's spent his entire career inspecting the intricacies of buildings, and by now he's got a personal interest in making them better.

That personal passion for buildings was behind a venture Mooney has recently gotten quite a lot of attention for, and that Criterium's not involved with. After the Portland Public Market closed last year, Mooney bought the Monument Square building next to Criterium's office so several vendors he was acquainted with could relocate their businesses. Eventually, Mooney and the vendors plan to extend the new market to the second floor and basement, although things on that front are moving slower than expected. Mooney, of course, made a thorough inspection of the building before he bought it.

"It's a hobby for me," says Mooney of the public market project. "I love buildings. That's what I do."