A tale of two Milwaukee contractors
The distance between two Milwaukee-area hvac contractors, The Wenninger Co. and Gross Heating & Air Conditioning, is about 14 miles. Yet, there is very little commonality in their customers.
Wenninger has a client base that includes both industrial and commercial accounts. The businesses include General Motors, Daimler/Chrysler, and several local breweries. The firm’s 1999 revenues should fall between $40 and $45 million.
Gross serves residential and light commercial customers. Its specialty is service and replacement. Sales this year should be around $2.5 million.
Despite their obvious differences, both companies are enjoying a resurgence in the Milwaukee-area economy and plans are in place for a profitable year 2000 at both establishments.
Gone are the days of the dependency on the industrial base to draw companies and workers to the area.
“The heavy industrial companies of the 1960s and 1970s, like Allis-Chalmers, Pabst, and Schlitz, are all gone,” said Dick Wenninger, owner of the Wenninger Co. “There is a resurgence in high-tech industries like GE Medical Systems. The Milwaukee market also has gone from plan-and-spec to design/build projects.”
Competition among contractors has also heated up in the past few years. Alan Ruesch, owner of Gross Heating & Air Conditioning, said the face of his competition is changing, too.
“Utilities and consolidators are all trying to get a piece of this market,” he said.
The changing landscape and the competitive atmosphere is a breath of fresh air for many contractors, especially the two spotlighted in this article.
Gone commercialDick Wenninger is a third-generation owner of this company, which was founded in 1911 by grandfather Ben. Dick’s father, Ed, ran the business for 42 years.
The company is firmly entrenched in southeastern Wisconsin and northern Illinois, providing hvac, plumbing, sheet metal, industrial piping, and industrial ventilation services, to name a few.
“We tend to travel a little more with some of our food processors and industrial customers,” said Wenninger. “We go with them to Madison and upstate Wisconsin.”
The company has transformed from plan-and-spec to design/build engineering.
“We have a small projects segment of the business and an engineering staff that is primarily in hvac design,” he said. “We also have designers in plumbing and fire protection.”
Although involved in several big projects in the community, Wenninger is not working on the most visible one — Miller Park, the future home of baseball’s Milwaukee Brewers. For that matter, no local mechanical contractors are involved.
“There were some requirements that made the project difficult to participate in, especially employment requirements,” Wenninger said. “I think there was a strategy on the part of local mechanical contractors to reserve their resources for existing customers, too. You don’t want to tell your customers that you are tied up on a project and can’t service them.”
Wenninger has a good reserve of people to count on. The company has a staff of 330 people and continues to be in the “growing mode.” Other leaders in the industry, namely consolidators, share that type of outlook and vision. Wenninger has already had contacts with the Wall Street consolidators and said there are some positives and negatives to the consolidation movement.
“The attraction is the added resources and the capabilities that consolidators bring to the table,” he said. “The down side is being able to serve your customers the way you feel is important rather than what a large company views as being important.
“The consolidation movement may change the face of our industry, but it is yet to be seen how that will play itself out. The worst thing that can happen in Milwaukee is that nothing happens and we continue doing what we’re doing.”
Utilities are comingWenninger also noted the pros and cons of another issue in the trade — utility competition. He said that Wisconsin Electric Power has WisVest, a non-utility subsidiary that specializes in designing and installing refrigeration systems.
“On the other hand, utilities have the ability to bring resources such as financing and power that can make them a great partner,” said Wenninger. “So far the Wisconsin utilities have not shown a willingness to partner with contractors.”
One resource the utilities won’t share is their experienced workers. With deregulation looming in the future, Wisconsin utilities may be ready to line up candidates for their service departments. The pickings are very slim right now and Wenninger is very concerned about the labor situation.
“We are not interested in going out and stealing talent from somewhere else,” he said.
“Our apprenticeship program is bringing in more apprentices but there is a problem here. I worry about voids being filled by our non-union competition.”
Wenninger sees the Milwaukee arena as a very competitive one. But he also sees a departure from a price-driven mentality to one where diversification in the high tech field will set him apart from other companies. His company’s ability to differentiate itself from other contractors is one of the keys to his success.
“We have a segment of our business called Medgas, which does nothing but medical gas service in area hospitals,” Wenninger said. “We have the technical expertise to offer this service and this niche has grown into a good business for us.”
Wenninger wants to continue to grow in the technical areas as the demand for new service skills increases. He acknowledges that technical sophistication is changing and contractors should do a better job of concentrating on these changes.
“We have to be just as knowledgeable about control systems as the manufacturers,” Wenninger said. “We have to recognize that there are changes coming in the industry and we have to be able to recognize these changes.”
One of the things he has done is to develop a job cost accounting software package called WennSoft™. The program is used for cost control and service management. Wenninger likes to think of it as a good marketing tool for his company, too.
“WennSoft is now a separate organization with about 80 employees,” said Wenninger, noting that his brother, Jim, runs the company. “This gave us a software system that was fully integrated and it gave our customers the confidence in us because we demonstrated that we were knowledgeable about all cost-control aspects of their projects.”
In order to go forward, Wenninger wants to be able to maintain his edge through diversity, uniqueness, and through a strong support staff. He wants his people to enjoy what they do and learn at the same time.
“We want to help people grow their careers while building our business,” he said. “We have a good place to work and grow. I enjoy working with young people and seeing them succeed.”
Residential reportBefore the advent of gas furnaces and radiant heating there was coal and oil. Some of today’s successful hvac contracting businesses were formed out of their roots in coal and oil. Gross Heating & A/C is no exception.
The company started out in 1925 as a seller and supplier of coal and oil. As the years went by, Gross added service work to its menu and the business started to grow. By the 1940s, the company sold off its oil and coal business and concentrated full-time on residential installations and service.
The list of owners includes founder William Gross, son George, and Mike Ruesch, who bought the business he worked for in 1962. Current owner, son Alan, bought the business from his father three years ago.
“I started in the business by working summers through high school and college,” said Alan Ruesch. “It was something I got involved with, enjoyed, and decided to continue on with.”
Today, the company employs 18 people. The market is residential and light commercial, broken down by add-on, replacement, and service.
Ruesch’s people serve the four-county Milwaukee area, with most service calls falling within a 20-mile radius of the shop.
“We’re seeing more growth in the light commercial area,” Ruesch said. “The commercial jobs, like rooftops and split replacements, help to fill in the gaps when residential service slows down.
“Most of our commercial work has come from word-of-mouth. We may have been working on a person’s home and they liked what we did so they referred us to someone in the commercial market.”
Keeping a good referral business is a sure way to keep the competition at bay, especially if that competition comes from consolidated contractors. Ruesch is keeping an eye on the consolidation movement as it slowly inches its way into the Milwaukee area.
“From what I see, the consolidators want to get into the residential add-on, replacement, and service,” said Ruesch. “It’s not as easy to consolidate the mechanical shops as it is residential shops because commercial work varies so much from job to job.
“As a consolidator, you can negotiate a better price from manufacturers if you are buying a lot of small furnaces or air conditioners rather than buying a few 100-ton rooftop units.”
If the consolidation movement comes to his neighborhood, Ruesch may listen to their sales pitch — but he’s not ready to give up ownership of the business.
“I enjoy what I’m doing, I’m comfortable, and I manage a little growth each year,” he said, but quickly added, “It wouldn’t surprise me if someone local sells out to a consolidator within the next year.”