The discussions, hosted by The NEWS' Business Editor John R. Hall, were taped in the studios of HVACTV.com, Providence, R.I. in late July. Hall was joined by contractors Joel Boucher of Boucher Energy Management Systems Inc., Mendon, Mass., and Robert O'Brien of Technical Heating Co., Mt. Sinai, N.Y.
The discussions were taped for future airing on HVACTV.com's monthly webcast on the last Tuesday night of each month. A fourth segment on carbon monoxide (CO) poisoning was also taped for a future webcast.
The survey results, published in the Aug. 1, 2005, issue of The NEWS, included some of the top business concerns of small contractors. Since its publication there have been several contractor roundtable discussions centered on small business concerns. The webcasts are the first of their kind to directly address the top three concerns with HVAC contractors.
PROFITABILITY
Boucher said that his company has been challenged by rising material costs in the last six to 12 months. He said that without keeping control of these costs, his bottom line profitability will be affected. He combats the problem by projecting out his material costs over the next several months, particularly the cost of copper."We have to adjust our costs based on material pricing," Boucher said. "We have to build in price increases ahead of time or stockpile materials. It ties up our cash flow, but overall it has been better for us."
O'Brien said that he has to keep adding on costs as prices go up. But he tries to include them as part of the fixed labor rate. "There has been a lot of resistance by customers to add-on charges," he said.
Keeping on top of costs is important to Boucher, who used to look at his overall costs every three to four months. Now he looks at some of his basic costs every week and his overall costs every month.
Another factor that affects profitability is lowering costs to remain competitive. Both Boucher and O'Brien have taken the high road and don't adjust their prices.
"It is a vicious circle that you have to ignore," said O'Brien. "We may bend a little on price but only if it means retaining a good customer who has been given a better price."
Boucher simply ignores the low price competitors because he knows that 80 percent of his competitors will fail within three to five years and he is only concerned about his own costs. "If a customer gets 10 bids on a job I won't even care about eight of them," he said.
"There are only one or two companies that I would consider as serious competitors."
INSURANCE
The efforts to combat double- and triple-digit increases in health and business insurance premiums have contractors looking for different and creative ways to offer insurance and still remain competitive. Boucher said he offers health insurance to his employees even though the costs affect his job bids and ultimately, the consumer.One creative way to keep costs down is to give employees health insurance with higher deductibles and then pay the deductible for trips to the emergency room. "We have found that it costs less for us to pay the deductible for an emergency room visit than to pay for an insurance premium with lower deductibles," Boucher said.
O'Brien admitted that he has stayed with the same insurance carrier but acknowledged that he would consider switching if the premiums got out of hand. He said that it is important for employees to practice good work safety habits since any claims will lead to higher premiums.
"A lot of claim problems have been related directly to the work," he said. "It is just a matter of doing a job correctly."
Boucher also believes that health insurance should be mandated for all companies, which would lead to a more level playing field among companies that have similar costs, who are bidding for the same work.
FINDING AND RETAINING WORKERS
Both Boucher and O'Brien agreed that it was difficult, if not impossible, to find quality people to work in the HVAC trade. Boucher said that he recently received a thick stack of resumes for an open position but after he narrowed down his choices to three people, he only called in one for an interview. His No. 1 criteria is a good personality."These are people who will be in your customer's home," he said. "They need to be able to interact with the homeowner and explain the work they are doing. They also have to be able to get along with other employees."
O'Brien said it was easier to find and train people as installers but service techs were much more difficult to find. He said that given the choice between hiring an experienced technician, a new vocational technology school graduate, or someone with a good customer service background outside of HVAC, he'd opt for the last two choices.
"I probably wouldn't hire someone who has worked for another contractor," he said. "They may have picked up bad habits."
Boucher thinks the best way to retain a good employee is by keeping the jobs interesting. He understands that repetitive work can be very mundane and does not pose a challenge to his workers. "We try and bring very interesting jobs to the table," he said.
O'Brien prefers keeping his employees involved in the job planning process - to make them feel part of the team. "We like giving them a ‘heads-up' all of the time," he said. "We don't want to have an assembly line mentality. People are entitled to know what is going on."
CARBON MONOXIDE
Although CO was not on the list of small business concerns, it is a topic that is timely. The webcast of this subject will occur in early winter, when the heating season is in full gear and CO problems from improperly maintained heating equipment will begin to peak. But CO is a year-round subject - something that both Boucher and O'Brien are fully aware of."We analyze the gas coming out of each appliance and use that information to advise customers on what they should do," Boucher said. He noted that the advice may include the need for additional cleaning or equipment replacement.
Boucher said that new laws in Massachusetts put more emphasis on direct venting, as well as requirements for CO detectors in homes and buildings.
"We include the cost of installing CO detectors in all of our proposals," he said.
O'Brien said that he doesn't sell CO detectors (N.Y. law does not require them) but if he doesn't see a CO detector in a home he will suggest that the homeowner buy one. However, he is careful about which one to recommend.
"I don't recommend a certain brand because of the UL [Underwriters Laboratories Inc.] issue," he said. UL approved CO detectors are tested to alarm at CO levels that may still be dangerous for the elderly, the sick, or children and infants.
Boucher has a solution to that problem - he recommends having two types of CO alarms. "We recommend detectors that are UL listed but we also recommend buying a low-level detector," he said. "I talk about CO with homeowners on every sales call. We have literature on the dangers of CO that we leave with customers. Our service techs also leave literature."
To view one of these webcasts or learn more about HVACTV.com, visit www.hvactv.com or e-mail director Ric Murray at ricm@hvactv.com.
Publication date: 09/11/2006
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