These contractors are integral to the local community
While Bunting and Justice oversee medium-sized companies in Utah’s largest city, Brown runs his business from a small office and one-person truck in the resort setting of this Rocky Mountain community.
About the only thing they have in common besides their trade name is their commitment to customer service.
The News will take a look at each business in this final installment on the Salt Lake City market and show how each plays an integral part in their community.
One common thread among the Salt Lake City service industry is a new website service called PointServ (The News, November 29, 1999). Both Brown and Justice expressed interest in this Web site, which allows consumers to schedule service appointments online. The Web site is using Salt Lake City as a test market — a new trend that will have its roots in this mountainous Utah region.
AireServ Heating, A/C: one-man shopBrown broke into the hvac business in Las Vegas, NV, while attending a technical training institute. It was good training, but the location lent itself to a lot of seasonal work.
“You usually got your 2,000 hours in between March and November,” he said. “It’s hard to stay ahead. I was just starting out and had to make some money.”
Brown moved to another arid region, Death Valley, CA, where he worked for a summer season. He decided he wanted year-round work so he relocated to Orem where he worked for a local contractor for 10 years.
Business buildingHe decided to strike out on his own with a partner but that didn’t work out, and he soon found himself going solo. After attending a Maurice Maio marketing seminar, he ran into a representative of AireServ, a national hvac franchise company, who got him interested in starting his own franchise in Orem.
That was five years ago. Brown took over the customer list of a contractor who was going out of business and he had an instant customer base.
He hired a tech one time but that didn’t work out. Although he is still looking to add to his staff, Brown said he is at a disadvantage.
“The ideal person I am looking for doesn’t want to work for a one-man shop,” he said. “If I find one guy who is qualified, there will be 15 other better-looking companies who want to snatch him up.”
Schoppe Co., Inc.The Schoppe name has been around for a long time — since 1878 — and has been involved with a lot of “unique” work.
Back then, a certain Mr. Schoppe, who Bunting describes as an “architectural artisan,” opened his shop. He did a lot of architectural sheet metal work and was also a rep for a manufacturer of cast iron heating stoves. In the 1940s, the company fabricated many of the props, such as swords and shields, for Hollywood movie studios.
The continuation of the Schoppe name reads like a Hollywood script. Bunting’s father, Ed, bought the business in the 1950s from Mr. Butterfield, an apprentice under Schoppe who later bought the business. One of the conditions of the sale was that the name was to stay the same while Butterfield was still alive. Ironically, he died a few days after the sale was complete.
“At that point in time my father had invested a lot of money in licensing and stationery,” Bunting said. “He didn’t have the resources to make the changes.”
Bunting didn’t want to join the business. He came out of college with a management degree but he agreed to temporarily help his father out. That was 1973. He’s had this “temporary” job ever since.
Today the company fabricates and installs systems in commercial businesses and institutions. Schoppe also does a lot of dust, paper, and smoke collection work. It used to have a residential service business, but sold that off more than 10 years ago and with that went all of the service business.
The company is union shop and does not compete with local open shop companies for the service business. Bunting employs 35 people and 1999 should show sales of between $5 million and $6 million.
“That’s our comfort zone,” he said. “We try hard to maintain that level.
“It’s never been a priority to be the biggest in the business. We try to pick the work we want to do and the people we want to work with. That’s been the success of our business.”
In pursuit of talentSuccessful businesses in the Salt Lake City area depend on good workers. The local shortage of hvac talent has Bunting concerned, too.
“It’s a major problem,” he said. “As an industry … we have partnered with local high schools to bring back vocational educational programs, which have disappeared from the schools.
“A lot of kids deserve the opportunity to pursue a vocational career.”
Bunting feels that the hvac industry is misunderstood by young people, citing an example of a sheet metal worker whose job duties aren’t familiar to students.
“They might think it’s a person who works in an auto body shop instead of someone who works on architectural sheet metal,” he said. “Its not just blue uniforms and tool belts, there’s a lot of high tech involved.”
Bunting looks beyond the labor problem and to perhaps the biggest challenge or “threat” to his business: utility competition. He said that although the consolidation movement posed initial concerns for him, he thinks the encroaching utility service market and possible partnerships with consolidators are things he needs to carefully watch.
“Consolidators may have to sell out to utilities in order to compete,” he said. “You either have to grow your business or you have to sell out to the utilities. Consolidators are responsible to their shareholders. They have to meet that bottom line.”
Bunting has some opinions about how utilities market their products and services. He doesn’t like to see them using the “C” word — cross-subsidization.
Fair competition and market share may also be at the heart of the Lennox acquisition of Service Experts. Bunting saw it as an act of self-preservation. He cited the local mixture of two Comfort Systems USA contractors who previously sold Lennox products as an example of why Lennox wanted to strengthen its competitive position.
Despite taking on the job with his father as a temporary position, Bunting sees himself retiring from the trade. He is 50 and still has a lot of work left in him. He predicts that a family member may be running the company in 10 years, or the company may be part of a merger or acquisition.
He will continue to give his people the tools they need to be successful and accountable. “I pride myself in having people that I can delegate the functions of the business to. We allow them to do their jobs with full authority and responsibility.”
ESCO Mechanical & Electrical/Blue DotJustice thought about banking his experience as a Trane sales engineer to start up his own company 20 years ago. He had considered buying a hamburger business but he chose to stay in hvac as a Trane Comfort Center.
When the “wheels came off” that hamburger idea, he formed ESCO, which is short for Environmental Systems and Controls. His business is 85% commercial service, replacement, new construction, and plumbing, and the Trane brand no longer dominates his product mix. He has added Lennox and other manufacturers to his product offerings.
“Trane is still our primary brand,” he said. “Once you get a brand in your blood, it’s hard to get rid of.”
ESCO doesn’t fit the typical Blue Dot mold of acquired contractors, which are heavily dependent on the residential service markets.
“We still fit in,” Justice said. “For example, if they [Blue Dot] wanted a 70% to 30% mix of residential-commercial, we fit into the 30% group. But we are focusing on increasing our residential service and installation market.”
Justice said that Blue Dot wasn’t the first consolidator to call on him. He listened to an offer from ARS but didn’t like what he heard. He said he’d been contacted by just about every one of the consolidators. He chose to sell to Blue Dot because he liked the direction they were going and their goals and plans.
“I really liked the people. They are committed to the industry and not just to Wall Street,” Justice said. “The Blue Dot contractors I talked to [before the acquisition] just seemed happier with them than other contractors were with their consolidators.”
He likes being associated with Blue Dot for another reason — the growing threat that utilities pose to the service business. He said that the local utility, QuestStar, was doing service work but they backed down eventually.
“I’d rather go to battle against them [utilities] as part of Blue Dot than as a little guy or as part of an association,” he said.
Justice isn’t sure what lies ahead in the consolidation movement. He was skeptical to begin with, but sees recent acquisitions by upstart consolidator R.S. Andrews and utility acquisitions of contractors as a sign that the consolidation movement is still strong.
What baffles him is the recent acquisition of Service Experts by Lennox.
The Lennox conundrum“It seems to me that Lennox is doing this for all of the wrong reasons,” he said. “They are like a basketball team that is playing not to lose. I wonder how you plan to win when your motivation is not to lose.”
Justice said that he is not sure what Blue Dot will do in the future, whether they continue to acquire or be acquired, but he would be disappointed if they sold out to a manufacturer.
“I’m sure some of the Service Experts were happy they were acquired by Lennox, but I don’t know of it was because a manufacturer acquired them or of they felt the value of their stock would go up,” he said.
Justice would like to spread his business to other markets, namely a residential service and plumbing contractor. He would rather offer these types of services than, say, pest control or maid service. He is currently looking for contractors to be service partners.
Keep 'em workingJustice feels fortunate not to have been stung by the shortage of qualified workers. He is an open shop and doesn’t have a local bench to provide workers, like union shops. So he relies on his own people, which numbers around 90.
“We try to keep the core group of people working,” he said. “That’s why we keep a steady flow of work coming in. We’ve been lucky not to lose anybody but we are having a hard time finding new people.
“Getting people interested in our trade is more of a society issue than an industry issue. There are a lot of people out there with great college degrees but they don’t have great jobs. We need to hold the blue collar workers in higher esteem.”
Justice worked with a local community college that dropped its vocational training because of what he sees as a pattern of overall disrespect for the trade.
“The administrators probably figured that they could make more money putting 30 students through a normal class schedule instead of 15 [vo-tech] students who occupied the same space.”
Despite the shortage of qualified people, Justice intends to grow all aspects of his business. He feels it is his mandate to grow and make some acquisitions.
“Our mix will change in the next five years where we become more service and replacement,” he said. “There are signs that the new construction business is slowing down in Salt Lake City but we won’t experience extreme highs or lows if we have the right mix.
“All of the new businesses that started up during these good economic times may have a hard time adjusting to a slower economy.”
Sidebar: How old is that unit? And other service misconceptionsHere’s a familiar tune: “I don’t know why it can’t be working, it’s only a couple of years old.”
Most service techs have heard this more than once on a no-heat call or a more routine noisy fan motor. The customer is sure the equipment is “only” a couple of years old when, in fact, it may be up to five years old or more.
“The mentality that I see in this area and I’m sure in other areas of the country is that most homeowners don’t view their furnaces as old until they are more than five years old,” said AireServ’s Bob Brown. “I’ve gone on plenty of calls where the customers said, ‘This unit is brand new’ and it’s really three years old.
“What happens is the filter has never been changed and the limit switch has failed because of the constant cycling. But in their mind, that unit is brand new and no time has passed between service calls.”
Brown added that it is very difficult to sell a customer a maintenance agreement on a new installation — unless they’ve had previous equipment problems. “If people have had problems because the unit hasn’t been maintained, that’s an easy sell.”
If a contractor is able to sell a service contract, the next hurdle to overcome is renewal. Brown said renewals can be a hard sell, too, especially if the customer has well-maintained equipment that rarely breaks down.
“I have gone in and done the [AireServ] Comfort Protection Plan so well that I’ve called up the customer the next year to renew and they’ve said, ‘You did such a good job that we won’t need [the plan] this year.’”
Brown said that he has a good track record of selling service agreements, even though he admits that most service techs would rather do troubleshooting and system analysis than perform maintenance checks.
“But the plans help me during mild weather, which has happened a lot this year.”