Hvacr in the Deep South: Beyond the Big Cities

January 25, 2001
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With the AHR Expo occurring in Atlanta, attention is once again focused on the South.

Atlanta is a large cosmopolitan city, with the same hvacr-related issues faced in many other cities of great size and diversity. But what of the small towns and rural areas?

How do contractors there go about their business? How do they find and keep customers? How do they recruit and retain technicians? How do they deal with consolidators and home improvement centers? (Or do they even have to deal with them at all?)

Here then is a snapshot in time of three southern contractors. They range from central Georgia to north Florida. (Any farther south in Florida and you are back in the North again, as the saying goes.)



COASTAL AIR CONDITIONING

Coastal Air Conditioning of Savannah, GA, has 44 employees and posts $5 million in annual revenue. It has 30 vehicles, of which 17 are for service and maintenance, six for installation, and the rest for use by salespeople and managers.

Savannah is about four hours from Atlanta. It is a small city of about 135,000 people in eastern Georgia along the Atlantic coast. Coastal has satellite operations to the west and south. It covers a 70-mile radius.

The company does 30% commercial service and maintenance up to 30 tons; and 70% residential, of which 70% is replacement and the balance is service.

The company is building up its commercial operations for a better balance with its residential work. It also reflects a trend in Georgia with new commercial construction targeting larger corporations and high-tech companies to go along with the large residential market.

Business is good in this sector of the South, said Jason Hagan, general manager for Coastal. “There’s no stagnation. I’ve talked to people in other areas and they are seeing some decline in residential growth and new buildings. We are seeing an increase.”

Regarding employees, Hagan states, “We’ve seen the labor market tighten up a little bit. But we try to create a great environment for our employees to work in, a place where they want to come to work. We have changed the way we look at future employees. What do they really want? It used to be hourly raises or benefits. Now they care for personal time, time off, time with families, and recognition. We are aiming things that way.

“We get a lot of referrals. People want to come to work for us. It is hard to find experienced technicians. So we’ve taken the approach of finding good people and training them ourselves.”

One trend through much of the United States is the push by Home Depot to move beyond supplying the do-it-yourselfer. Many of the chain’s retail stores offer services for professional contractors and have established relationships with Apex Supply and Trane. Coastal finds itself part of the equation.

“Interesting things are happenings here,” Hagan said. “Home Depot is getting into the heating and a/c side. We actually look forward to it. We happen to be a Trane dealer and comfort specialists and we are going to do the installation for Home Depot. We get the lead and the billing is through Home Depot.

“In the hvac market, everything changes. So you just adjust and make it work for you instead of resisting it.”

At the same time, Coastal wants to grow its business beyond what Home Depot can provide the company. Said Hagan, “We are establishing our customer base and gathering as many customers as we can and treating them better than they could have ever expected. So we will continue to grow that business.”



ROWE AIR CONDITIONING & HEATING

Deep in southern Georgia, near the Florida state line is Valdosta, a town of 40,000, which Rowe Air Conditioning & Heating calls home. The company does residential design-build custom homes and some light commercial change-out. The company has 15 employees and serves a market area of 100,000 people. The company has seven trucks traveling a 40-mile radius.

Owner Ricky Rowe noted that “86% of what we do is heat pumps.” He has been a Lennox dealer for 15 years.

A military base and a 10,000-student university help generate what Rowe calls a strong economy. Unemployment hovers about 3.1%. “Most everybody who wants to work is working.”

For Rowe’s company, growth is coming in two ways. “We are expanding the area we serve in order to grow. We are also expanding the way we go to market with an emphasis on change-out upgrades. We used to do a lot of new construction that is big in our area. But I made a business decision to get away from that market and focus on other areas. We were doing $300,000 a year in new construction. But the margins were very low in terms of what the builders were allowing you to make.”

One current Rowe project involves $28,000 worth of a/c in a 6,800-sq-ft home.

The low unemployment rate means pulling potential employees from a limited pool. “So I took the ones that were good and trained them for the change-out market,” said Rowe. “In the service tech area, we’ve hired people with credentials and people that just have mechanical backgrounds and we bring them through the ranks.” He noted that his company has three service techs and a maintenance man, but there is some crossover in responsibilities.

He noted that his membership in the Contractor Success Group (CSG), an organization of contractors, has helped by providing training for installers, maintenance personnel, and service technicians.

To hold techs, “We pay a bit above the normal scale. We empower our guys more. We don’t ride them. We create a work environment that we feel is the best around.”

As far as competition from the warehouse stores, it’s a matter of wait and see. “We have a Home Depot but they are not in hvac. They do have the Trane [affiliation], but I’ve not run into any competitive bid with a customer that said, ‘Well, I’ve looked at Home Depot.’

“I don’t know of any contractors working with Home Depot. They may stop by and pick up a thermostat if they are on the other side of town [from their regular supply house] and the service tech doesn’t have one. But in terms of using them as main suppliers, the numbers aren’t there.”

The national hot topic of consolidation is apparently not a big issue in his part of the country. Rowe said, “One contractor joined a consolidator but all he does is commercial.” And for someone who does mainly residential, that is not a big deal.



SOUTHERN AIR

Palatka, FL, is a small town of about 15,000 in a rural area between Jacksonville, Daytona, and Gainesville in northern Florida. Casey Caison is the owner and general manager of Southern Air. He offers his perspective — past, present, and future— on doing business in the South.

“My dad and I started the company in 1980,” said Caison. “We had intended on it just being us. We got where we could not keep up with the workload so we started hiring employees. We have 12 employees now. My dad retired last year. We run three install crews with two men on each crew. We have two service techs, a precision tune-up specialist, and a comfort adviser. My wife works in the office and we have a CSP [customer service professional] who works in the office, too.”

Southern’s emphasis is on residential systems.

“We do mostly residential, and some new construction, but our specialty is energy upgrades. We go into someone’s house that has a system creating high utility costs, correct some things, and put in a really nice system,” he said.

Caisson appreciates the benefits of his tight-knit community. “We market with Yellow Pages, word of mouth, reputation. We are in a rural area. It is a really nice place to live, with a slower pace of life. Palatka has a population of 15,000. Putnam County has 70,000. We stay mostly in Putnam.

“It has been slow growth, but they are working on an Interstate link from I-95 to I-75. It’s going to pass through the Palatka area and they are looking for rapid growth. Right now, there is not a whole lot of growth in our immediate area. But there is in the Jacksonville area.”

Asked about any affiliations, Caison replies, “We are an independent contractor. There have been no overtures [from consolidators], and we haven’t thought about it a lot. We like what we are doing right now. As long as you focus on being customer service oriented and keep building on your company reputation, there will always be a place for the small independents — regardless of what takes place with consolidation.

“Techs are not easy to get a hold of,” he acknowledged. “We are looking for good communication skills and character. We try to expand their technical skills. We hear about them through word of mouth, or some of them are just looking for a job. They come into the area and hear about our company. They don’t have to have technical knowledge. We can get them that.”

Caison attributes part of his success to Contractor Success Group. “CSG has been a tremendous help. We’ve been implementing their processes, procedures, and systems. Our gross sales have doubled in less than a two-year period. We are very happy with that.”

Publication date: 01/29/2001

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