Contractors Discuss Business Concerns

September 9, 2005
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Davenport-area contractors sat down to discuss their business concerns. The group included (from left) Mac Coffin, Tom Gabrilson, Tim Smith, Steve Bornhoeft, Dick Davison, Jim Maynard, and Brad Zogg.
DAVENPORT, Iowa - When The News set out to get feedback to its recent small contractor survey ("Small Contractors Have Big Concerns," Aug. 1, 2005), the goal was to validate some of the highly ranked concerns, i.e. profitability, insurance, and worker shortage. But according to one group of contractors from the Davenport, Iowa area, there are local concerns that loom just as large for them.

In the coming months, The News will be seeking out feedback from HVAC contractors on their biggest business concerns and reporting the results for readers. The meeting with Davenport contractors was the first of these informal discussions.

What we learned from the group of five contractors and the executive director of the local Sheet Metal and Air Conditioning Contractors' National Association (SMACNA) was that their biggest concerns involved the quality of workmanship from low-ball competitors and the rising union labor costs.

The luncheon meeting included the following people: Tom Gabrilson of Gabrilson Indoor Comfort Solutions, Davenport, Mac Coffin of Frank Millard & Co. Inc., Burlington, Iowa, Steve Bornhoeft of Bornhoeft Heating & Air Conditioning, East Moline, Ill., Jim Maynard and Brad Zogg of Crawford Co., Rock Island, Ill., Tim Smith of The Schebler Co., Bettendorf, Iowa, and Dick Davison, executive director of the Iowa Sheet Metal Contractors Association Inc. (SMACNA chapter).

In The News' survey, profitability was ranked as the No. 1 concern among 300 respondents. One Davenport-area contractor agreed, but said there is much more to the answer. "Profitability takes everything in - it's not one thing," said Coffin. "For me it is costs I can't control like insurance and fuel. You just can't pass these along."

The other contractors agreed, citing escalating fuel costs as a major concern. "I started a $3 fuel surcharge and no one has complained," said Bornhoeft.

Other contractors said that customers are likely to complain about any miscellaneous charges on their invoice, but Smith suggested, "You can always list the fuel charges under ‘disposable items.'"

Maynard said he doesn't see fuel costs coming down anytime soon, so he'd prefer to turn his attention to other costs that he can control. "You have to know where to shift your costs, i.e. realizing that advertising costs will increase to compete with contractors offering low-end pricing."

All of the contractors agreed that low-end pricing was a major concern, citing a growing trend among consumers. "Customers have a Wal-Mart mentality," said Bornhoeft.

Gabrilson noted, "The general public would not know a quality job if they see it; and you only get one shot at these people. The guys in this room are quality guys who don't worry about the price shoppers.

"Wal-Mart will still flourish, but I see a comeback of the mom and pop stores."

Maynard added, "There are always people who will price shop through the Yellow Pages - can't avoid that."

That thinking is what led to the formation of a local "consumer's information" organization, founded by members of the Iowa SMACNA chapter.

The Better Heating Cooling Bureau

In an effort to combat what it called poor business practices in the Davenport area, SMACNA chapter members formed the Better Heating Cooling Bureau (BHCB), a sort of watchdog organization for consumers. The mission statement of the group, along with membership information, is available at www.bhcb.org.

The statement reads, "The Better Heating & Cooling Bureau is dedicated to preserving the highest ethical and moral standards in the heating and cooling industry."

Gabrilson said that the group started out with 12 contractors and has recently downsized to eight. It costs $250 per year for membership dues and an additional percentage of sales, not to exceed a total of $700 per year. Members must also offer a second opinion on service or replacement, which consumers are encouraged to seek.

Three members of the BHCB were present at the Davenport meeting and all expressed concerns that homeowners are being influenced by low-price competition and bad advice, particularly regarding repair versus replacement.

"If 100 customers take one furnace sale from us every year, that is 100 furnaces," said Gabrilson. "That is very significant."

The contractors also discussed the fact that competition has been driving down prices and that higher union wages are making it difficult to maintain healthy profitability. They noted that competition is coming from nonunion shops who are paying equitable wages - equitable as long as the local union is reasonable about negotiating wage increases.

Davison noted, "There are only half of the union contractors in business today that used to be here. This Quad City area has about a 50-50 split now."

Gabrilson added, "It is tough putting someone on the road for the same prices that nonunion people are charging. And there will be good nonunion competition here eventually."

If contractors in your community wish to discuss their business concerns in person or via teleconference, please contact News' business management editor John R. Hall at johnhall@achrnews.com.

Publication date: 09/12/2005

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