HVAC and the Recession: Its Effect on Business
The “great recession of 2009” has come and gone. But has it left a hangover? Of course. Unemployment levels are still high, foreclosures are still ruining the American dream, and businesses remain shuttered. There are a lot of negative aftereffects. In fact, one HVAC contractor calls 2011 a “backward year.”
But it isn’t all doom and gloom. The economic downturn has given business owners the unique opportunity of turning the mirror on themselves. They have been able to see what has worked and what has not. They have tweaked, toyed with, changed, or eliminated what has not worked. Many have kept right on doing what they did before and during the recession. There have been a lot of interesting stories rising from the ashes of double-digit drops in revenues and profits. And HVAC contractors are right in the middle of this story.
In Parts One and Two of this series, we’ve looked at how HVAC contractors managed before and during the recession. In this final installment, contractors talk about the changes they have made since and offer advice on how to deal with future economic tumult.
“During 2010 we stepped back and took a hard look at our entire operation,” said Frank Detmer of Detmer & Sons (Fairborn, Ohio). “We have recently made major upgrades to our computer/software system, added an entirely new phone system, and our techs were issued tablets to use in the field. We completely revamped our inventory system and strategy. These changes have almost entirely eliminated our paper trail and made us more efficient which allowed us to eliminate two overhead positions (not because of lack of work, but we had become that much more efficient.)
“I believe our business, as well as the industry as a whole, can now see a light at the end of the tunnel. Although our company was never in serious trouble, it is definitely a relief and a good feeling to know that better days are ahead, and we will be even stronger when it completely recovers.”
Change is Good
One contractor believed that a “cultural change” within her company was necessary to stay strong after the recession. “At the end of 2010 I believed that in order to grow the business I really needed to remove any negativity within the organization and to help grow my staff professionally,” said Elaine Powers of Powers Heating & Air Conditioning Inc. (Doraville, Ga.). “In the first quarter of this year I bought out my partner, sent employees to well over 100 hours of training, hired our first-ever professional residential salesman, and I am working again with the market mix to determine our priorities for the next 12-24 months.
“It has been amazing the change in the company culture with just these changes in our organization. The employees have a positive attitude and they seem to feel that the consumers with jobs seem to be more positive in their job security, and some of the unemployed are starting to go back to work.”
Like Powers, another contractor believes that training is as important now as it ever has been — and believes it can make a big difference in his business, moving forward.
“The most important steps I have taken were to take training classes offered by various manufacturers,” said Bill Brink of Kettle Moraine Heating & A/C (Genesee Depot, Wis.). “When you’re a growing business, it’s hard to get away for these, most of which are two-day training classes. I usually have to travel to them, but only a couple hours. The classes have allowed my sister and me to be diversified. Some homes don’t need a traditional gas furnace and air conditioner, and these classes give you the skills to win these types of jobs.”
Rick Brown of Lyons Service (Bowling Green, Ky.) said his company made the decision to shift into the residential replacement market, based on the new construction trends. “This year (2011) we started a residential department focusing on service, replacement, and affordable spring/fall service agreements,” he said. “Although we’ve been in business 55 years we had never gone after the residential market. Back in 2010 we developed a residential operating plan and budget and hired the right motivated individual to manage the department.”
For another contractor, being able to react to changes in the market are keys to his company’s success. “We are out-of-the-box thinkers,” said Tom Stritecky of Waterbury Heating & Cooling, Inc. (Sioux Falls, S.D.). “We just hired a marketing director. She will be responsible for all in-house campaigns, placing our ads, working our service contracts, and social marketing. Social marketing is becoming a great way to grab a new market share.”
Brad Swanson of M&S Plumbing Heating & Air Conditioning (Manhattan, Kan.) said change was as simple as adding a new product to the mix. “We added in back-up emergency generators as part of our products to sell and install,” he said. “We have seen an upswing in these sales that have helped offset other things that have slowed down.”
No Need to Change
Some HVAC contractors believe that sticking to their guns has been and will continue to be their modus operandi. They have built strong businesses and withstood economic downturns and in some cases, had actually increased their revenues and profits during the recession. The energy tax credits and rebates have had a lot to do with increased sales but fundamental business strength has been a key.
“We’ve made no major changes,” said Ronnie Awtry of Speedy Services Air Conditioning & Heating (Cedar Hill, Texas). “Our philosophy of quality and affordability and customer service has remained intact. Why change a good thing? It brought us this far.
“I see accelerated growth. Our business model more aligns with customer trends in my opinion. Our decision to opt out of the big our name sells mentality has been our biggest asset. As I said, our customers buy Speedy Services and what we ethically, honestly, and stake our reputation on far more than any shining name of years gone past ideology.”
Ray Isaac of Isaac Heating & Air Conditioning (Rochester, N.Y.) has seen many ups and downs over the years but he has always positioned his company to remain strong and stay the course. “We run an efficient organization and always pay close attention to fundamentals like employee support, cash flow, and customer retention through superior service and through service agreements,” he said. “We have never lost sight of our core strengths.”
For another contractor, one constant that doesn’t need to change is the ability to react to change. “We have remained stable during the downturn, but we never stop looking for ways to be a stronger organization,” said Joseph Nichter of Comfort Systems USA – Southwest, Chandler, Ariz. “Our business plan and strategic plan always incorporate improvements and changes within the organization on an annual basis. We never stop looking for innovative ways to improve our business.”
If I Had to Do It Over…
Some HVAC contractors admitted that if they had a do-over during the recession, they would have done some things differently. Here are some of those responses.
“I kick myself daily for not acting on the downturn more quickly,” said Mike Salmon of Anderson Air Corps (Albuquerque, N.M.). “We burned through too much of our surpluses thinking things would return to normal. I should have acted more quickly to scrutinize overhead.”
“Looking back I would have communicated more with our customers,” said Dewey Jenkins of Morris Jenkins, Charlotte, N.C. “I would have informed them that if they lost their jobs we would provide any service they needed and they could pay us when they got another job. This was a lost opportunity to develop lifetime loyalty.”
Ronnie Awtry said he wouldn’t have been so loyal to a brand name. “Our loyalty to a manufacturer would have been one of the only changes,” he said. “Customers want quality and affordability. They buy us and trust us to best guide them into that. Most don’t care what name brand is on their a/c unit. They just want it to work and be dependable and trust that their dealer will offer aftersales service.”
In the end, the recession caused HVAC contractors to be better than their competition and to differentiate themselves in their markets. Paul Nowak of Nowak Heating & Air Conditioning, Inc. (Hayward, Calif.) summed up his feelings. “This economy had brought me down so low, that I felt if I didn’t start doing things differently (like I did in the beginning of my company), that I was going to lose all that I had worked for,” he said. “I am a proud man, and I will not allow this economy to take me down. I will find a way to make it work in this new world of economic uncertainty. That’s my job. I am an entrepreneur and I love it!”
Sidebar: Dealing with Bad Times
As part of the research for this series, HVAC contractors were asked: “What advice would you give to business owners who might be facing market challenges in their future?”
Below are their replies.
• “Make a plan, win support for your plan, implement it fairly but firmly, evaluate the results then make a new plan. Repeat often!” — Mike Salmon, Anderson Air Corps
• “Always be advancing and learning about our industry. Surround yourself with people that can help you and want to grow with you. We joined a mix group about seven years ago and it has been a tremendous help to our company.” — Tammy Denton, DHC Comfort Inc.
• “Stay positive and surround yourself with positive people. Be creative, try something new. Train yourself with skills that others don’t know or have and make yourself unique in the marketplace. Show enthusiasm and go get the work. It’s not going to just fall in your lap.” — Bill Brink, Kettle Moraine Heating & A/C
• “Take care of your customers, take care of your employees, do what you think is right, and don’t listen to all the guys hanging their heads in this industry. Life is all about choices. Try new avenues. If they fail, don’t try them again. You will fail. However, my theory is that if you try five new avenues, only three have to work to be a success.” — Tom Stritecky, Waterbury Heating & Cooling Inc.
• “Don’t sell yourself short; there always has been and always will be a need for HVAC. We provide a very valuable service to our communities. Join a mix group ASAP. Join ACCA (local, state, and national) ASAP. These two entities are a wealth of valuable information, benefits, and mentoring. — Frank Detmer, Detmer and Sons Inc.
• “Be as diversified in your business mix as you can manage. Be ready to stop in your tracks when one door closes in your market mix and be prepared to know which door you should focus on opening next by having your assets (physical and people) ready to move into that market segment through continued cross training and optimum utilization. When business is bad, do not cut marketing funds but instead expand your marketing reaches. Know your financial position at all times and always be prepared for the worst six months to a year down the road. And most of all, never promise what you cannot guarantee; but always give your best to achieve your goals. If you make mama proud, you can be proud of yourself.”
— Elaine Powers, Powers Heating & Air
• “If your company is so adapted to any single market, such as commercial, residential, sales or such, you will have a much more difficult time dealing with market changes. Also, you have to believe in the product you sell. Service after the sale is your word-of-mouth customer that requires no advertising; if you are not capitalizing on this, you’re missing out on your least expensive means of marketing.” — Ronnie Awtry, Speedy Services Air Conditioning and Heating
• “Focus first on your existing customers. Take care of them. Provide better service than anyone else can and they will stick with you.” — Dewey Jenkins, Morris Jenkins
• “Communicate! As leaders we must not depend on ourselves to come up with all the solutions. We have to solicit and listen to everyone in our organizations. Sometimes the best solutions come outside of management. But don’t limit yourself to internal feedback; talk to your external customers not only for new ideas but ask their input on the ways they run their business and feedback for the changes you intend to put in place at your own company. Another key to success that can be tied to a successful operation is the ability to understand your market and strengths. Anticipate industry shifts through rigorous planning. If necessary, hire a consultant to help you through the process — it will easily pay for the investment. Never stop looking for continuous improvement and don’t be afraid to change the way you’re used to doing things.” — Joseph Nichter, Comfort Systems USA – Southwest
• “As far as business: Identify the market you want and be the best provider in your area for that market. I’ve seen many contractors try to diversify themselves too quickly or by reacting, without planning and identifying what they want to achieve and how they are going to achieve it. Don’t expect overnight success. As far as personal: Make sure you enjoy what you’re doing and the market you’re serving. If you don’t enjoy your work it will be noticed by your employees and your customers. Make your place of business a good place to work. This may sound corny but it’s so true: Treat others the way you would want to be treated. This is hard to do when you have to ‘no charge’ for excessive labor or wrong parts due to your tech’s error (even with the customer being unaware of your fault) but it’s truly treating the customer the way you would want to be treated.” — Rick Brown, Lyons Service
• “Stop throwing spaghetti sauce on a poor meal. It’s like raising prices to cover overhead. It may work for a while but eventually it goes away, just like the spaghetti sauce.” — Ray Isaac, Isaac Heating & Air Conditioning, Inc.
Publication date: 09/26/2011