Snapshot from Salt Lake City: An established contractor and an upstart
That means a lot more people will be building new homes and purchasing used homes — good news for area hvac contractors.
Two companies have positioned themselves to meet the new demands although both come from different backgrounds.
South of Salt Lake City in Spanish Fork, Vern Tanner has been servicing his customers for 25 years at Triple T Heating and Cooling. In Salt Lake City, Paul Bloomquist and three other former managers at CSI/Bonneville/Comfort Systems USA (profiled in The News last week), have been in business less than two years and are enjoying a meteoric rise.
Tanner wants to continue to grow in his region but he doesn’t want to get too big. “The larger you get, the more you lose customer focus. People want to be taken care of by someone they trust, not be calling an 800 number.”
Bloomquist said his only limitations for finding new customers lies in the commercial markets. “We don’t have the assets to finance million dollar jobs, unlike Comfort Systems USA. But we have done some strip malls and convenience stores.”
If steady growth continues as projected, Tanner and Bloomquist will have all of the growth they can handle.
Triple heating & coolingWhen Tanner started his business 25 years ago, he tried to think of an appropriate name for the company. He didn’t want to name it after the town he was in because he wasn’t sure how long he’d stay there.
“I named it Triple T because I have three sons and I hoped that they would all be partners in the business some day,” he said. “In fact, it has worked out that way.” One of Tanner’s two daughters also works for the business.
Tanner prefers to stay away from new construction, despite the steady rise of new homes, due to the competition in this market. His service and replacement business is 60% commercial and 40% residential.
For a while, Tanner depended on one very important customer to keep him busy, the L.D.S. Church (The Church of Jesus Christ of the Latter Day Saints).
“They were building 25,000-square-foot chapels everywhere,” he said. “Worldwide they build about 700 chapels a year. That used to be all we did and if they ever shut down, we’d be out of business. So we diversified in 1992 and took on a lot of different work.”
Worker retentionPart of his overall business plan is to grow by 50% in the next five years. By the numbers, that would mean a growth from $2.2 million in sales to $3.3 million by 2005.
In order to do that, Tanner will have to add to his staff and keep the people he already has. While he has a good record of retaining good workers, the job market continues to make it tough to find new ones.
“There was no formal hvac training in this area until about four years ago,” he said. “The problem is that high school counselors continue to steer students into a formal, four-year college education.”
Tanner joined with some other local contractors and developed an apprenticeship program with Utah Valley State College in nearby Orem. It has worked out pretty well.
“We’ve got eight or nine of our workers in the program where they go to school two nights a week and work a regular 40-hour schedule,” he said. “The training and work go hand-in-hand. Just last week we had three men earn their journeyman status.”
Tanner’s strength is his ability to hold on to his workers. He cited at least 10 of his 25 workers who had been with him more than 10 years, not including his family members.
“We have a lot of activities that involve the spouses and a reward trip which was very popular,” he said. “For the most part, our people enjoy their work, especially if they are excelling. If they are well trained, they are going to have a good lifestyle.
“We’ve added benefits and a 401K program so that we can at least compete with some of the local businesses that have in-house maintenance groups.”
Success, successionTanner has some other competition in town that recently sprung up — consolidators.
Actually, he’s keeping an eye on them and they are keeping an eye on him. He said he is contacted almost every week by a different consolidator, but he has no intention to sell the business.
“I’ve always planned on turning the business over to my sons, so selling to someone else never entered my mind,” he said. “It would be very disheartening to sell my business for stock, with the possibility of losing 20% to 40% of its value in a short period of time, especially when it has been so hard to get it to where it is today.”
What’s the good part about this work? Tanner said he enjoys working with his customers and seeing how his sons run the business.
He believes that the customers he forged from his own generation have carried over into the third generation of Tanners (some of the grandchildren have come to work for the company).
“We have good employees and we are getting good value from them,” Tanner said. “If you don’t have good employees, you don’t have much. Our workers focus on being polite to our customers and it can result in two or three leads.”
Comfort central heating, cooling & plumbingThe graduating class of Salt Lake City contractor CSI/Bonneville/Comfort Systems USA (The News, Jan. 10) reads like a Who’s Who among this Utah community.
Two former members left to start their own company and eventually sold back to CSI. Four others left to start their own company and are doing quite well, thank you.
Paul Bloomquist and three other managers formed their own company in 1997 after mulling the possibility of striking out on their own. The result is a profitable company with sales exceeding $2 million in a relatively short period of time.
The eventual acquisition of CSI by Comfort Systems helped nudge the contractor over the top, landing the company in a comfortable spot as a new and upcoming business.
“The acquisition added a little fuel to the fire,” Bloomquist said. “We realized after a couple of years of thinking we would eventually take over the company [CSI], it wasn’t going to happen. Some of us didn’t think the acquisition was an opportunity for us to advance.”
This is what sends stocks downBloomquist continued speaking with as much insight as anyone in the industry on the past, present, and future of hvac consolidation.
“I think all consolidators need to identify who will run their companies down the road and I don’t think they are doing that,” he said. “What happens after the present owner retires? These former owners can sell 20% of their stock each year for five years after the initial acquisition.
“When the owners start selling their stock, they are sending a message to Wall Street that they no longer have confidence in their former company. They need a system of incentives in place to encourage the next wave of managers.”
Bloomquist said that this mentality might have led to the changes at two major consolidators because the personal touch and commitment had gone away when the owners sold out.
“People don’t buy from a company, they buy from people, and that was the problem with ARS and Service Experts. The people with the knowledge and expertise were the former owners who sold out. They did not have the same motivation and drive as before [the acquisition].”
Straight talk on Lennox dealBloomquist took a moment to reflect on Service Experts’ acquisition by Lennox and the potential fallout from that deal.
“Lennox has used its dealer network to get its name recognition out there, and it has been very successful,” he said. “But its dealers have paid for that and gotten little recognition of their own in return.
“Lennox was out to see us less than two years after we started our business. They offered us a deal where they would get first right of refusal if and when we sold our business.
“It didn’t make sense to make a commitment like that. It was an agreement that would have made us a 100% Lennox dealer.”
Then there’s this much-discussed dilemma: Many of the acquired Service Experts dealers have sold other manufacturers’ equipment for years.
“Carrier product managers are concerned about going into a Lennox dealership and sharing their market strategy with employees of a Lennox-owned company.
“There’s a culture in Lennox that I’ve never seen before,” said Bloomquist. “It’s a risky thing they’ve done. Why would they risk alienating 5,800 dealers for the sake of a couple of hundred new ones?”
Strong in residential add-onsBloomquist is confident that his company will weather the stormy seas in the industry today because of his competitive advantage.
“At Comfort Central, we believe that as long as we are in the applied technology business, there is always a place for someone who is competent. We take the time to size the job right and install it right.”
He said his company is strong in the residential add-on and replacement market. One of the reasons for his confidence is the fact that the four owners of Comfort Central are also managers with separate fields of expertise.
“It’s difficult wearing four or five hats at the same time while trying to run a company,” he conceded.
Comfort Central includes new construction in its market mix, but Bloomquist pointed out that the company stays away from track-style homes, preferring to work with homeowners who want “better equipment” in their custom homes than builders usually supply.
He also works with a handful of commercial contractors, although the company is not equipped to tackle some of the bigger jobs that he’d like to go after.
“We don’t have the assets to finance a $1 million job like Comfort Systems might be able to do,” he said. “But our only limits are our abilities to finance a job. We continue to work on strip malls and convenience stores.”
Help wantedIf lack of financing is limiting, so too is the lack of qualified technicians. The company’s 30-person staff needs some beefing up in order to pursue new projects.
Bloomquist is keenly aware of the problems the industry faces in attracting new people, but he doesn’t subscribe to the philosophy of stealing away his competitions’ workers.
“It is difficult to train someone who has worked for a competitor for a long time, like teaching an old dog new tricks,” he said. “We’ve had better results hiring people who have little or no hvac experience and then training them.
“It’s a lot easier to have a clean hard drive than to reprogram the whole thing.”
He said service techs in Salt Lake City are capable of earning $60,000 to $80,000 per year.
Bloomquist is not looking to hire away workers from his former employer or to lure away former customers. He believes in fair competition and letting the chips fall where they may.
“We didn’t make it a point to chase Comfort Systems’ customers or take their customer lists,” he said. “A lot of our customers are new, and others went with us because of personal relationships.”
So what does Bloomquist recommend for success in this kind of hvac contracting climate?
“The first thing is to have a business plan,” he concluded. “Buy a computer and write a business plan — it is critical to anyone’s success. You have to have a plan and know what your costs are.
“There is no written guarantee where you’ll be five to 10 years from now, but you have to know where you’re headed.”
With his ties to the past behind him and the enticing specter of controlling his own destiny in his grasp, Bloomquist is enjoying the ride.
“We’re getting to drive the bus instead of riding on it.”
Sidebar: Questar Corp. tabs Comfort Systems for home service plansSALT LAKE CITY, UT — In an era when contractors look wearily on local utilities and fight tooth-and-nail for fair competition, there is one contractor-utility marriage that is working out quite well.
Comfort Systems USA and Questar Corp. have joined forces to offer Salt Lake City-area residents maintenance plans for their heating and cooling equipment.
Questar, a $2.2 billion energy resources and service company, lists retail energy services as one of many programs in its overall strategy to meet strong customer growth in the western U.S.
CSI/Bonneville A/C, Heating & Refrigeration, one of two Comfort Systems USA contractors in this area of Utah, performs annual 12-point system tune-ups that are advertised on Questar’s website and promoted in Yellow Pages and newspaper ads under the Questar HomeWorks moniker.
According to Mark Lowe of CSI/Bonneville, the partnership began a year and a half ago, not too long after Questar tried its own venture into the service market.
“They had pursued their own services years ago, but we [area contractors] discouraged the plan because we felt it may have been unfair competition,” Lowe said.
CSI/Bonneville went from an adversarial relationship with Questar to a friendly one partly because of the marketing abilities that were available to them.
“Questar does the advertising and we get leads from them,” Lowe said. “They advertise the work we do and it is sent out with their monthly billings.”