ACHRNEWS

Consolidated Contractors Mirror Corporate Goals

September 15, 2000


Three years ago, when a consolidated contractor hung out his/her shingle down the street, the gut reactions from independent contractors were curiosity, disdain, and an urge to stage an all-out offensive to keep existing customers and find new ones.

In short, there was a new kid on the block and it was time to put your best foot forward.

Three years later, ownership and management have changed; new nameplates adorn desks where former hvacr business owners sat for years. Employees have come and gone, at a relatively normal pace. And new names have been added to old company names, or completely replaced them.

But these events have been happening in the hvacr contracting market with or without consolidation. The big changes that were anticipated by the consolidation movement haven’t materialized — at least not yet.

The News visited a few consolidated contractors recently and asked how things have progressed from their splashy beginnings to the current state of the business. We visited ComfortSystems USA and R.S. Andrews contractors in Kansas City, KS, and a Lennox/Service Experts contractor in North Little Rock, AR, giving a representation of a consolidated commercial con-tractor, manufacturer-owned residential contractor, and a privately owned, up-and-coming contractor. (See reports on pages 10, 12, and 14.)

These contractors face the same challenges that independent contractors face: finding qualified technicians, dealing with utility competition, and ensuring that their services are value driven, not price driven.



Here it Comes Again:‘Raising the Bar’

This terminology has been beaten to death, yet it still comes up in conversation every time consolidation is discussed, particularly in relation to customer service and pricing.

“Consolidation is forcing other contractors to be more realistic [about service],” said Bill Posladek of the A.B. May Co./R.S. Andrews of Kansas City. “The margins have been raised, too.”

If customers were used to one way of doing things before, does the new way of doing business have an negative or positive affect on them?

“We haven’t experienced any problems [transitioning into the new business],” said Charlie Detherage of Service Experts of Arkansas, Inc. “The customers didn’t care when we changed names. Once we gave customers an announcement letter and made our first call to them, everything was all right.”



Job Opportunities

Consolidators do have a trump card when it comes to filling management positions. That was true in the beginning of the movement and it is still true today.

Detherage, for example, came to Service Experts with a background in hvacr marketing and sales, but he had no previous experience owning and operating a contracting firm.

“My ability to market the business [to prospective employees and customers] in the area is important and now it is being helped by having more dollars to back me up,” he said. “A lot of people fear being eased out of the workplace, but if they want to grow and achieve, we have the assets to back it up.”

There will always be the opportunity for young people who enter the trade to move up to management or ownership. That is one of the trademarks of the hvacr business. The big difference between consolidators and independents is that the road to management tends to be a little quicker through a multiunit company, such as an ARS/Rescue Rooter or Blue Dot Services. However, the problem of finding and retaining qualified labor seems to be universal.



Utility Competitors

As utilities and utility-owned competitors move into previously uncharted waters, consolidated contractors have taken measures to retain their share of the market.

“We would like to grow into business niches where there is good profitability,” said Ken Karr of The Fagan Company/Comfort Systems USA in Kansas City. “We want to add energy engineering, join business groups, and partner with utilities.

“Luckily for us, we get referrals from Comfort Systems companies in other states and they send customers to us.”

If independent contractors are looking for surprising developments out of the consolidation movement, they may be disappointed to learn that nothing much has changed — for now.

The three contractors we met in this segment are conducting business as usual and doing their part to keep up industry standards and promote the business to new work seekers. But that’s just “for now.” In three more years, these contractors may have a different story to tell.

Publication date: 09/18/2000