The Unusual Summer Of 2003
The News asked some of its Contractor Consultants if the weather had any affect on business and, if so, what measures they have taken to offset a slowdown in service and replacement work.
“This summer caps a very unusual year,” said Jim Hussey of Marina Mechanical, San Leandro, Calif., a commercial contractor. “We found that for the first half of the year, every job we sold went on hold. All we did was build backlog.
“Obviously, everything broke at once and in June our volume and employee count doubled. Fortunately, as a union contractor, we had access to skilled workers and were able to handle the expansion. Still, our project and administrative systems have been stretched. As the end of summer nears, we are completing a lot of the work and expect things to settle back to our normal staffing and employee count.”
Larry Taylor of AirRite Air Conditioning Co. Inc., Fort Worth, Texas, said the workload did not slow down and it exposed a bigger problem that the industry faces.
“The weather was good and hot and service came back in a strong way,” he said. “Of course, we are still fighting the manpower issue and could do more work, but I am not willing to lower my standards of workmanship just for the dollar. It always comes back to get you in the end.
“We have raised prices in order to pay more compensation to the employees. This is keeping them loyal to us, but my longer term concern is, as the field folks’ age, where are my replacements?”
Russ Donnici of Mechanical Air Services Inc., San Jose, Calif., talked about a favorite subject: profitability.
“Amazingly, we had a slight increase in revenues from the previous year and a higher level of profitability,” he said. “Since all our work is referral, I can’t attribute the increase in revenues to any specific thing. The increase in profitability, I believe, was a direct result from increased attention to the basics of cost control and resource utilization by the second-generation management team.
“It helps that we have no debt, even though we have added several new vehicles this year, and use our own cash reserves instead of a credit line.”
It’s Not All Good“Construction in the Carolinas lost one-third of their available work days due to rain,” said Dave Dombrowski of Metro Services/ARS, Raleigh, N.C. “As one of the wettest years on record, this again emphasized the need for us to take control of our business and not be dependent upon the weather.
“In addition, these extremely high humidity conditions placed a strong focus on proper equipment and duct design, since we had many complaints of poor dehumidification and sweating ducts. We are continuing to focus on training all of our team to address and recognize this opportunity for increased home comfort.”
Mary Marble of J.A. Marble Co., Dearborn, Mich., said the Detroit area had some atypical weather.
“This summer has been mild,” she said. “If we did not need service technicians on a couple of construction jobs (to do refrigeration piping), we would have had to go to 32-hour work weeks. There were very few overtime/emergency calls.
“Last year there were 30 days over 90 degrees; this year it was only five or so.”
“Business this summer was just OK,” said Charlie Klapperich of Western Building Services Inc./Comfort Systems USA, Denver. “We deal strictly in the commercial sector, so our after-hours business does not increase for the entire organization as it would when dealing with the residential sector.
“Our low-temperature division is an exception to that, however. When dealing with grocery stores and convenience stores, the business levels increase and after-hours efforts increase with the high temperatures of summer.”
The news is mixed from Hank Bloom of Environmental Conditioning Systems, Mentor, Ohio. “Service seemed to be very busy and not due to heat,” he said. “Many people keep holding off on repairs and replacements and it is starting to cause them problems.
“The new work is very slow due to the economy, although process piping and pharmaceutical work seems to be steady. Hopefully, the economy will pick up and spending will resume.”
Ann Kahn of Kahn Mechanical Contractors, Dallas, also had a mixed review. “It wasn’t as busy in our service department compared to the past, but we’ve still managed to stay busy with add-ons and replacements.”
Keeping CoolSince some parts of the United States experienced extremely hot weather, it became important for contractors to keep their employees cool and well rested.
“We do plan our work to limit overtime,” said Donnici. “We communicate with the clients and schedule accordingly. We stress to clients that we don’t hire temporary workers just to get a job done. We are not willing to sacrifice quality just to get the job done. This is especially important when your business depends on referrals.
“We also have a bi-weekly BBQ at the office for all employees. And we have a bi-monthly family get-together at a local restaurant.”
Taylor said his company has a portable humidification device that is beneficial to workers in hot spaces.
“A side benefit of this process is that the moist air settles the dust in the attic and keeps the air cleaner so they [techs] can breath easier,” he said. “Even with a breathing mask on, this process makes it more comfortable for them.
“We have purchased a vest that has pockets in it with freezable pouches of fluid. You insert the pouches of fluid inside the vest and it helps to keep the body temperature lower.”
“It is always difficult to ascertain what mindset our field technicians are in after a few weeks of 60 to 70 hours of effort,” said Klapperich. “In our area, we always look for brief periods of respite to allow some regeneration.”
Kahn added, “The workloads did produce some stress, but we threw a party and passed out some cash.”
What’s Coming Next?“We believe this feast-or-famine scenario is a direct result of the economy,” said Hussey. “In the commercial sector, our clients felt no sense of urgency, primarily due to the low interest rates. As soon as there was a sense that the economy might improve, clients rushed to get as much done as possible, while the perceived price was low. This push has not diminished, and for the foreseeable future we see a steady flow of work.
“When it was really slow, we saw a lot of other companies cut prices. Many times prices were cut down to, or even below, hard cost. We don’t understand this mentality because inevitably the economy turns and those tempted to cut prices are loaded down with low- or no margin-work.
“As an industry, we must resist the temptation to give our valuable services away for cost. All we do is hurt the marketplace, our employees, and the strength of our individual enterprises.”
Some News consultants voiced concern for the end of the year and into 2004.
“Even with the higher temperatures, the economy continues to struggle in Colorado with continual erosion of margins,” said Klapperich. “Many new startups willing to work for wages create havoc. I have a deep-seated fear of 2004.”
“Once the outside temperature drops, I am concerned that the volume of work will die,” said Taylor. “We find the consumers making the correct decisions in repairing or replacing their systems, but not being proactive about changing them out yet. I think if the investment markets improve, next year the proactive market will return.”
There are some proactive things that News consultants plan to do.
Marble said, “In the spring, we will run a promotion to get A/C maintenance calls on the books. This month we will start to remind customers that it’s time to think about scheduling a boiler tuneup. We will offer a discount on the use of a combustion analyzer.”
Taylor is using good indoor air quality as a tool to push more residential sales.
“We are doing a three month cable television promotional push on our whole-house infiltration, filtration, and dehumidification systems, services, and duct sealing to try and offset the slow times,” he said. “We need to get out of the ‘commodities business of selling boxes’ that I feel the manufacturers are going to be pushing their dealers hard to sell this fall.
“We are also putting together an information packet to deliver to allergy and asthma doctors’ offices and clinics, that tells about air purification and the need to find the source of poor IAQ.”
Publication date: 09/15/2003