Consolidation Furor Dies Down: What Now?
INDIANAPOLIS - It’s been several years since a wave of consolidation hit the Indianapolis market, bringing with it the likes of Wall Street consolidators ARS, Service Experts, Group MAC, and Comfort Systems USA. There was a lot of speculation about whether the established independents or the upstart consolidators would grab the bigger market share in the area. In the last few years, the furor has died down. Some consolidators have closed up shop or changed their ownership and what was once a big news topic is no longer one that attracts national attention.
But to the established HVACR contractors in the Indianapolis market, there are still plenty of interesting topics to discuss. And that is what several of them did during a recent sit-down roundtable discussion with The NEWS.
Five area contractors joined in, including Aaron York of Aaron York’s Quality A/C & Heating, Garrett Cook of Cook Heating & Air, Derrick Compton of Compton Mechanical Services Inc., Steve Becker of Airtron, and Scott Appel of Appel Heating & A/C.
“The younger generation is basically a lazy generation,” said Appel. “I know this because I am a part of this generation. It’s all about what we business owners can do for them and not what they can do for us.”
Lazy would be one way to describe the young generation but others were mentioned too, including unrealistic expectations and dissatisfaction with their current jobs.
“Some kids think they can be a job foreman right out of the gate,” said Compton. “They don’t realize they have to work themselves up and into higher positions.”
Cook noted he made the decision to work in HVACR and is happy about it, while others he went to school with still aren’t sure what they want to do. “A lot of my friends have had at least three jobs in the four years since we graduated,” he said.
Becker said that since it is so difficult to find young talent, it might be better to put more effort into keeping the good talent that contractors already have. “Try and keep who you’ve got,” he said. “Retention is very important if you can’t find any new employees.”
Appel said he had a solid group of employees, but questioned where to go when he needs to replace them. Cook agreed. “Retention is often overlooked,” he said.
“There is no guarantee of quality work in my area,” he said.
“Having proof of insurance is the only license you need here. There are a lot of bad installations in our area because people aren’t pulling permits and nobody is getting inspected.”
Appel said a lot of the burden needs to be shared by homeowners.
“I don’t require an inspection unless the homeowner asks for it,” he said. “Licensing is great, but no one ever calls us out on it. Since licensing requires inspections and there are no inspections, why have licensing?”
Compton said he would prefer to see uniform licensing statewide and not just in certain areas.
Becker questioned just how many permits are pulled for replacement jobs in Indianapolis. The other contractors guessed between 40-70 percent. He thinks changing personnel has a definite impact on the paper trail.
“There is a big change in the number of permits pulled when local contractors change their managers,” he said.
Appel said he often checks on his competitors to see who actually pulls permits for jobs. York took that idea one step further. “Maybe the government should hire some workers in the summer whose job it would be to check permits on new construction sites,” he said. “The penalties and fines collected would probably pay for this program.
“We basically need to help the dishonest people become honest. If a guy isn’t getting a permit there is a reason. He is saving money by slamming it in and leaving without an inspection, resulting in a poor installation.”
“Consumers should ask a business to show its license,” said Compton. “But that usually isn’t going to happen.”
Cook questioned the amount of field-testing that goes on and also talked about the number of times parts go through generational changes.
“We stocked circuit boards that we could use as replacements, but the design of the board changed so much that we couldn’t replace one in the field with one in our inventory, so we swapped out the board with one in our stock, knowing it would fail,” he said. “That way we could get the warranty to replace it.”
The economy of the Indianapolis market also was an important topic. Becker noted that new housing starts had “gone into the tank - down 44 percent.”
Appel said that while his company only sold one more unit in 2007 compared to 2006, the service side of his business went up. “People continue to change parts instead of systems,” he said. “But we always give them the replacement option, too.”
Cook has seen an increase in his commercial replacement business, while residential replacements have slowed down. He pointed out another obvious concern, too. “People are still going to need replacements,” he said. “The trick is to get them to buy their replacements from us.”
Keeping loyal customers is a challenge for other contractors who often face some unusual competition. “Some companies will take advantage of one customer, making a very high profit on a single job, so they can afford to compete on price with another,” said Appel.
“I heard of one company that oversold a financing package to a 92-year-old customer,” said Compton. “The financing was for 10 years.”
Finally, the discussion turned to IAQ, something all of the contractors believe is an important part of the product-market mix. “Our industry is still not good at selling IAQ,” said Cook. “We need to do a better job of identifying what IAQ products are available.”
Becker would like to know more about the IAQ market as a whole, starting with some statistics. “There needs to be studies of the average indoor air quality in a home,” he said. “It is really scary what we find in some of these homes.”
As far as consolidation, Compton summed up his thoughts. “Concerns and fears were unfounded,” he said. “Consolidators didn’t take over the world.”
Publication date: 04/21/2008
But to the established HVACR contractors in the Indianapolis market, there are still plenty of interesting topics to discuss. And that is what several of them did during a recent sit-down roundtable discussion with The NEWS.
Five area contractors joined in, including Aaron York of Aaron York’s Quality A/C & Heating, Garrett Cook of Cook Heating & Air, Derrick Compton of Compton Mechanical Services Inc., Steve Becker of Airtron, and Scott Appel of Appel Heating & A/C.
GETTING KIDS INTO HVACR
One of the most talked about topics and one that is on the minds of contractors all over the United States is the shortage of service techs and the diminishing pool of young talent that is coming along to replace the techs that are nearing retirement. The contractors agreed that young people today have a different attitude toward their careers from only a generation ago.“The younger generation is basically a lazy generation,” said Appel. “I know this because I am a part of this generation. It’s all about what we business owners can do for them and not what they can do for us.”
Lazy would be one way to describe the young generation but others were mentioned too, including unrealistic expectations and dissatisfaction with their current jobs.
“Some kids think they can be a job foreman right out of the gate,” said Compton. “They don’t realize they have to work themselves up and into higher positions.”
Cook noted he made the decision to work in HVACR and is happy about it, while others he went to school with still aren’t sure what they want to do. “A lot of my friends have had at least three jobs in the four years since we graduated,” he said.
Becker said that since it is so difficult to find young talent, it might be better to put more effort into keeping the good talent that contractors already have. “Try and keep who you’ve got,” he said. “Retention is very important if you can’t find any new employees.”
Appel said he had a solid group of employees, but questioned where to go when he needs to replace them. Cook agreed. “Retention is often overlooked,” he said.
LICENSING AND PERMITS
Another topic getting a lot of attention both in Indianapolis and other parts of the country is the changing rules regarding permits and its impact on licensing and inspections. Cook said he just wants to improve the quality of work in his rural location.“There is no guarantee of quality work in my area,” he said.
“Having proof of insurance is the only license you need here. There are a lot of bad installations in our area because people aren’t pulling permits and nobody is getting inspected.”
Appel said a lot of the burden needs to be shared by homeowners.
“I don’t require an inspection unless the homeowner asks for it,” he said. “Licensing is great, but no one ever calls us out on it. Since licensing requires inspections and there are no inspections, why have licensing?”
Compton said he would prefer to see uniform licensing statewide and not just in certain areas.
Becker questioned just how many permits are pulled for replacement jobs in Indianapolis. The other contractors guessed between 40-70 percent. He thinks changing personnel has a definite impact on the paper trail.
“There is a big change in the number of permits pulled when local contractors change their managers,” he said.
Appel said he often checks on his competitors to see who actually pulls permits for jobs. York took that idea one step further. “Maybe the government should hire some workers in the summer whose job it would be to check permits on new construction sites,” he said. “The penalties and fines collected would probably pay for this program.
“We basically need to help the dishonest people become honest. If a guy isn’t getting a permit there is a reason. He is saving money by slamming it in and leaving without an inspection, resulting in a poor installation.”
“Consumers should ask a business to show its license,” said Compton. “But that usually isn’t going to happen.”
THIS AND THAT
The Indianapolis group also talked about equipment quality and the need for extended warranties. Appel said he was amazed by the number of warranty claims he has paid recently and added, “I am not impressed with the quality of the HVACR equipment today. It seems that within five years a part will fail.”Cook questioned the amount of field-testing that goes on and also talked about the number of times parts go through generational changes.
“We stocked circuit boards that we could use as replacements, but the design of the board changed so much that we couldn’t replace one in the field with one in our inventory, so we swapped out the board with one in our stock, knowing it would fail,” he said. “That way we could get the warranty to replace it.”
The economy of the Indianapolis market also was an important topic. Becker noted that new housing starts had “gone into the tank - down 44 percent.”
Appel said that while his company only sold one more unit in 2007 compared to 2006, the service side of his business went up. “People continue to change parts instead of systems,” he said. “But we always give them the replacement option, too.”
Cook has seen an increase in his commercial replacement business, while residential replacements have slowed down. He pointed out another obvious concern, too. “People are still going to need replacements,” he said. “The trick is to get them to buy their replacements from us.”
Keeping loyal customers is a challenge for other contractors who often face some unusual competition. “Some companies will take advantage of one customer, making a very high profit on a single job, so they can afford to compete on price with another,” said Appel.
“I heard of one company that oversold a financing package to a 92-year-old customer,” said Compton. “The financing was for 10 years.”
Finally, the discussion turned to IAQ, something all of the contractors believe is an important part of the product-market mix. “Our industry is still not good at selling IAQ,” said Cook. “We need to do a better job of identifying what IAQ products are available.”
Becker would like to know more about the IAQ market as a whole, starting with some statistics. “There needs to be studies of the average indoor air quality in a home,” he said. “It is really scary what we find in some of these homes.”
As far as consolidation, Compton summed up his thoughts. “Concerns and fears were unfounded,” he said. “Consolidators didn’t take over the world.”
Publication date: 04/21/2008
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