5. Pest control.

“We want to maximize our share of a customer’s lifetime value,” Andrews explained. “We are interested in $1,300 to $1,400 per customer each year, as opposed to $300.”

Formula based on historical success

The formula has a history of success for the company. From the mid-1980s to the mid-90s, the company grew internally at an average rate of 27% per year.

It was at that point when Andrews stopped and looked at a business that was outgrowing its operating system. “We had to slow our growth and look into becoming more of a learning organization,” he said.

Andrews added that he does not want the company to become a statistic — the one where only 2% of new businesses will survive their first 10 years.

“The causes of the failure rate are because there are no standard processes in place and the inability to replicate a business format in multiple locations,” Andrews said. “McDonald’s is a perfect example. They have a 300% turnover rate per year and yet they still sell hamburgers because they have standardized systems.”

More growth on the way?

With effective standardized “best practices” systems in place, the consolidator is looking outward for growth, and has attained some lofty heights. It has acquired more than 20 contractors, and plans to dramatically increase that number by the end of the year.

It is targeting 24 southeastern states and 57 metropolitan markets. The company is looking for $10 million hvac contractors that it can acquire, and not necessarily plumbing contractors.

“Plumbing companies are easier to manage,” Andrews added. “If you can have success running a heating and cooling business, you’d be successful at running any service business.”

The profile of a typical acquisition is a contractor that has been in business for five years, and that concentrates on service and replacement more than new construction.

Andrews is quick to point out that “We do not roll-up companies. We buy and build companies.”

Makin' money

Its Atlanta service organization will have revenues of $22 million this year. Andrews pointed out that the service facility only uses a single line ad in the local Yellow Pages — his company has established a strong word-of-mouth reputation.

Its first acquisition, Air Professionals of Knoxville, will do $2 million this year.

Although the company has similar characteristics of multiple service companies, such as Sears Home Central and ServiceMaster, Andrews said there is a big difference.

“We are totally different because they have not integrated their services.”

Andrews points out that his company’s patented Excalibur business management system ties all of the home services together. For example, a homeowner’s history of window replacement, electrical work, or plumbing service is all included in their file.

Hvac service can be scheduled to coincide with other services in the home, if necessary.

Growing its own technicians

Not all of the consolidator’s success can be tied to its service history and aggressive expansion. Some of the groundwork for a future class of technicians is being laid on the ground floor of a new corporate facility, which opened in March, 1999.

Perhaps the biggest gem in the new facility is the state-run Dekalb Technical Institute. R.S. Andrews provides the building and the state of Georgia does the rest.

“The state provides the instructors and the curriculum — they also do the recruiting,” said Andrews. “We use the school as a farm club for new technicians and for training of our existing technicians. It is fully accredited.”

With a firm foundation and an ambitious growth plan, R.S. Andrews seems to be pushing the right buttons. When it comes time to go public, the company may have positioned itself as a leader among hvac consolidators.