A 'Rose City' by any other name wouldn't be Portland
Constant reminders of the beauty and devastation of Mother Nature also surround it. Lurking along the northern horizons are the ominous figures of Mt. Hood and Mt. St. Helens. While Mt. Hood shows off its majestic peak 11,240 feet above sea level, Mt. St. Helens displays its massive “hole,” caused by the 1980 volcanic eruption that killed 57 people and turned the countryside barren and ashen gray.
Perhaps these are reasons why residents have so much respect and fear of the beauty of the land surrounding the metropolitan region. Greater Portland boasts a population of over 1.7 million people, spread out over six counties, and is home to some big names in business, such as Nike. Preserving nature is important to conservationists — and it provides a direct link to increased business for some local hvacr contractors.
“Conservationists don’t like seeing trees being cut down, which makes gas-burning fireplaces very popular,” said Alan Sanchez, owner of Tri County Temp Control in Oregon City. “The fireplace market is really growing. We can make as much off a gas fireplace as we can on a gas furnace.”
The appeal of add-on sales like gas fireplaces is just one thing that makes the Portland hvacr market unique and different from other markets the same size across the country. The News paid a visit to this scenic Northwest U.S. community and, through the eyes of local residential and commercial contractors, we will present some of its story over a three-part series.
With a relatively mild year-round climate and, by the way, only trace amounts of snowfall, it would be logical to assume that air conditioning is not a premium product in this area. However, it is becoming increasingly popular as new homes go up and homeowners of older homes see the added value in indoor comfort.
The first two contractors featured in this article use the web to advertise and market their businesses. Each has a Web site to inform and attract new residential and commercial customers. The Internet is a useful tool and here are two reasons why it is alive and well in the Rose City.
First stop: Tri County Temp ControlNot too far from the “end” of the famous Oregon Trail sits Tri County Temp Control (www.tricounty temp.com), resting on a hill overlooking a busy Oregon interstate freeway. From his perch, Sanchez has taken on the look of a “mini-consolidator,” having purchased several other smaller contractors in the area in the past.
Sanchez started the business in 1987 after spending eight years working for another local contractor.
“I started from scratch and have had as many as 50 employees working here,” he said. “I’m sort of the local Portland consolidator. I don’t know of any other companies who have bought as many businesses as I have around here.”
Would Sanchez join up with a national consolidator if one made him a good offer?
“Sure,” he answered with a laugh. “Would I have a choice?”
Tri County’s market mix includes mostly residential retrofit and service, as well as light commercial new construction. Sanchez also works with some builders in new subdivisions and custom homes. He uses his contacts in these markets to sell his add-on fireplace business and air conditioners.
“Probably the biggest reason we do new construction is the add-on air conditioning business down the road,” said Sanchez. “It’s our bread-and-butter.”
It doesn’t hurt the add-on business if one of your products is a gas fireplace. Sanchez has a fireplace showroom and he actively markets this portion of his business, citing the growing popularity of gas fireplaces.
“I cannot remember the last time we worked on a new home that didn’t have a gas fireplace in it,” he said. “Most of the new homes have at least two fireplaces.”
Since gas fireplaces are so popular, that must make the local gas utility happy. And speaking of the utility, how does Tri County get along with local gas supplier Northwest Natural Gas Co.?
“The gas company backs the heating contractors in the Portland area,” said Sanchez. “They have a ‘Service Solutions’ program that involves referrals to local contractors if a service problem involves more than lighting a pilot. Our phone rings constantly from referrals.
“We are one of about 10 to 12 contractors on the referral list. They [utilities] don’t compete with us at all. They actually give our name out.”
Since Sanchez doesn’t have utilities to compete with, there are other sources of concern, mainly from former employees. Since Portland has very few laws regulating licensing, almost anyone can hang their shingle and begin selling and servicing furnaces and air conditioners.
“We went through a four-month period recently that was one of the slowest I’ve ever seen since I’ve had my own business,” he said. “All contractors laid off workers and some of those people went out and started their own business, going after their former employer’s customers and slashing prices.
“It’s a double-edged sword. You can’t afford to keep the workers but when you let them go, they bring the market down.”
Sanchez is also keeping an eye on Home Depot, which is in his neighborhood.
“They [Home Depot] bought Apex Supply, which is a little scary,” he said. “We’d rather work with them than compete against them.”
For now, Sanchez sees a lot of reasons why his business should continue to grow. He cites a growing a/c market where 35-50% of all new homes will add on a/c in the first two years. He is actively pursuing the service contract market because of its potential.
“We have not tapped what is available out there yet,” he said. “And that’s what we are working hard and heavy on right now. There are a lot of homeowners out there who want a good reputable contractor to work on their equipment.
“With a lack of licensing laws, a lot of businesses have dropped the ball — and homeowners are left holding the bag.”
Second stop: Allied Heating & Air ConditioningScott Leverenz has a simple business philosophy at Allied Heating & A/C (www.alliedheating.com). It’s what keeps him active and his 26 employees busy.
“Get in, get out, and get paid,” he said. “We like small jobs that we can turn around in a couple of months. We can turn on a dime and react to a customer who needs us on a job right away.”
Leverenz is a veteran of the Portland hvacr market, having started with a family business in 1978 in installations and sales. Eventually he purchased Allied in 1993 from an owner who was in poor health.
Allied’s market mix is approximately 30% residential and 70% commercial service and replacement. It opted against the new construction market because, as Leverenz said, “We didn’t have the resources or the desire to continue new construction work.”
He added that his company usually takes on commercial projects up to $100,000 that require shorter windows and won’t tie up his resources. He calls it a niche where his company is “too big to be small and too small to be big.”
Leverenz said his company has been focusing on specific goals, namely planned maintenance for residential customers. Last year his company sold 300 contracts and he plans to double that amount this year. He is also zeroing in on commercial maintenance but is finding the road a little tougher there.
“We probably have 60 or 70 commercial maintenance customers,” he said. “But it is difficult to find someone who has the savvy and ability to sell commercial maintenance agreements because it takes a certain understanding of the work. It takes someone special.”
Finding a good salesperson is like finding an experienced field technician — there just isn’t too many available in the Portland area.
“I can go out and sell all kinds of jobs, but unless I have the people to do the work, the sales aren’t going to do me any good,” said Leverenz.
“I hired one guy who gave his notice [with his contractor employer], called me up the next day, and told me his employer made him an offer he couldn’t refuse. I felt he wanted me to ‘up’ my offer. He wound up staying with his employer.
“They [contractor] knew they were faced with finding another person, which could take several months. You lose momentum when you lose an employee.”
Once a prospective employee throws his hat into the ring, the human resources manager at Excellence Alliance Inc. (EAI), which Allied is a member of, screens them. But hiring is only the beginning of a long process.
“It’s a challenge for us to make sure our people are productive,” said Leverenz. “The pressure is on everybody to manage our labor force and ensure they are productive.”
Like Alan Sanchez at Tri County, Leverenz sees the problem of competing against low-ball bidders as a real challenge, especially since Oregon’s licensing laws lack teeth.
“If you can put moisture on a mirror, you are a heating contractor,” he joked.
But Leverenz has found a way to combat the low-balling.
“We were in a bid situation and came in with a $3,000 estimate,” he said. “Another company, offering a lesser brand, came in at $2,200, a substantial difference. We went out to the customer’s home after the installation and took a picture. It was shoddy.
“Now that photo makes a good sales tool for us. Some of these companies are doing poor installations and not pulling permits for the job — and the customer doesn’t even know.
“Our challenge is to educate the consumers.”
As for his company’s future, Leverenz is pointing toward gearing up for new competition from consolidated contractors. Although he thinks that national consolidators take longer to react to local customers’ needs, he is still keeping an eye on the corporate decision-makers.
“I’d like to push toward a 50-50 mix of residential and commercial work in order to compete with a potential consolidator,” he said. “I welcome consolidators because they will raise the bar and make us all better.”
Sidebar: Keys to success? Glad you asked because here are three from eachWhen it came time to list some of the reasons why he has been successful, Alan Sanchez of Tri County Temp Control did not hesitate to provide three.
Reason 1: “We market ourselves through the work we do in new homes. Even though we are doing new construction — which is not highly profitable — we are marketing ourselves to that new homeowner who will call us for add-on work down the road.”
Reason 2: “Good clean trucks on the road are very important. We have 25 to 30 trucks on the road and people get to recognize our name.”
Reason 3: “You have to be versatile. You have to be able to do light commercial, service, new construction, and retrofit. Add-ons and retrofits for a new home usually come after a couple of years. Long-term business is very important.”
Meanwhile, Scott Leverenz of Allied Heating & Air Conditioning is very customer-focused.
Reason 1: “When there is a problem, don’t ignore it. Address it. The business or homeowner commands respect and I like to handle any disputes right way.”
Reason 2: “Try to establish a one-on-one relationship with customers. I look at names of customers in our database and don’t know some of them. That makes me feel guilty.”
Reason 3: “Follow-up with your customers. It will help with your referral business. I like to bring a bouquet of flowers to our customer once the job is done.”
Sidebar: Home-based contractor uses his Portland 'smarts'Paul Jensen has a tough time taking his work home with him. That’s because his work is at his home. Well, at least his office is. Jensen is the owner of Able Heating & Cooling, Inc., in the Portland suburb of Tigard.
Able has residential service-retrofit customers throughout the metropolitan Portland area and also does a little light commercial work. He started the business five years ago, spanning an hvac career that began in the 1960s. He now has four field workers and puts five trucks on the road.
Jensen said it’s hard to go home at night and put the business out of his mind.
“It’s tough to shut the business down and close up,” he said. “I have to physically go down and shut the door [to his office].”
Jensen said despite what he calls, “a horrible winter season” last year, where snow fell for only a half day, business has been pretty good — for a few reasons.
“We are customer-oriented and we get a ton of referrals,” he said. “My son, Art, and foreman Dale Carreia are the frontline people and they go that extra mile for our customers. They get us a lot of referrals, which keeps us going.”
He added, “I also work with the local gas company doing some gas-piping jobs and I work with local contractors who do installation work and give me the service business.”
Jensen also depends on the Internet to drum up business. His home page is linked to the Internet yellow pages and he claims to be the web pioneer in the area.
Jensen sees what is happening in the hvac trade but he prefers to keep his nose to the wheel and work with the customers and the staff that he has. He isn’t concerned about adding more workers. He just wants to keep the ones he has happy.
“I’m comfortable with what I have. If I get more customers, I will have to get more help,” he said.