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The New Industry Buzzword Is …

June 26, 2000
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Consolidating? Naw. Based on a recent visit to the Lone Star State, the new industry buzzword should be “operating.”

That’s how two of the more successful Houston, TX-based consolidators, Encompass Services Corp. (ESC) and Comfort Systems USA (CSUSA), described their present positions. Instead of looking to gobble up more and more contractors, each says it is now settling down and, well, concentrating on operating.

“Our operating plan is in place,” assured Robert Tyler, president, Mechanical Group, Encom-pass. “We are on target for what we want to do.”

The faces were different inside Suite 500 at 777 Post Oak Blvd. However, the words bantered about at Comfort Systems USA headquarters were very similar.

“I firmly believe that our business strategy is right on target,” said Gary Hess, executive vice president and coo, Comfort Systems USA. “Dollars and cents, we made it. Now we need to come together as a company. We have a good business model and now we have to get operating.”

Time Flies

Other common words uttered included “branding” and “cross-selling.” Expect each company to hit home these ideas today, tomorrow, and into the foreseeable future.

“This is our year,” offered Reagan Busbee, senior vice president, CSUSA. “Now is the time to change the industry. This is the year of transition, the year of branding.”

It seems like only yesterday that CSUSA was on the hunt for contractors. However, this week marks the third anniversary of this company going public.

Hess is proud of the fact that 90% of the original owners are still with CSUSA.

Here is a quick synopsis of CSUSA’s contractor makeup, as rattled off by Hess:

  • Seventy percent are open shops, the remainder are union.

  • Income per contractor ranges from $4 million or $5 million to $100 million, with the average being $15 million.

  • CSUSA is light in residential, heavy in design-build.

  • And it labels itself “the fourth-largest temperature control dealer.”

“We are selling a solution,” said Hess, noting the importance of its design-build efforts. “We deliver the expertise. The contractor and the engineer are joined at the hip. We think design-build. We are pushing the solution side of the business. I’d like to think we are working as a partner.”

The bottom line? This year expect CSUSA to continue to work on the company from within, pushing for teamwork and more cross-selling.

“Do we have a way to go? Yes,” said Hess. “We are now learning each other’s capabilities.”

“Our contractors have to go to the customers and say, ‘I am willing to listen. How can I help you?’ We have to do something to boost up the value we bring to the table,” said Busbee.

On The Move

Two weeks prior to The News’ visit to Encompass, it had its first-ever convention. All parties were present, and, apparently, it is “two companies going well,” per Donald Luke, coo and director.

Those two companies are Group Maintenance America Corp. (GroupMAC) and Building One Services Corp., which merged in February to form Encompass. It calls itself “the leading national provider of electrical/communications, mechanical, janitorial, and maintenance management services to commercial, industrial, and residential markets.”

“The results of our first quarter as a combined entity were what we expected during a very busy transition period,” said Joe Ivey, president and ceo.

If it had to focus on four areas this year, Encompass’ list would include local operations, information technology, cross-selling, and national accounts. Regarding the latter, it believes it can take advantage of its geographic diversity in that it can “deliver to national accounts like no one else can.” Encompass’ National Accounts Group is primarily a sales and engineering force supported by its contractors, who deliver the “product,” so to speak — meaning new installations and after-market services.

What sets it apart from the rest of the consolidation force, believe both Luke and Tyler, is the corporation’s commitment to improving its infrastructure “to gain stability from within.”

More Coming

What I’ve told you is just the tip of the iceberg, so to speak.

In late August or early September, The News plans to provide readers with a look back and a look ahead at the consolidation story. We want to find out if the consolidation of contractors has really had an impact on the independents.

News business management editor John Hall is presently gathering information for this upcoming series. Of course, we encourage you all to pass along your thoughts on the subject to John Hall by phone (248-244-6417), fax (248-362-0317), or e-mail (halljr@bnp.com).

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