Lee Watson of Watson Heat & Air (speaking) talks with other Nordyne dealers and distributors about the challenges facing a small one-person operation like his.
The participants, from the local Nashville market and from outstate Tennessee included: Jim Thompson of Thompson Services Inc., Steve McKinzie of McKinzie Mechanical, John Fey of Noland Co., Phillip Gray and Jason Broyles of South Nashville Heating & Cooling Co., Barry Westbrook of Doc Air, Alana Ward of Baggett Heating & Cooling, Dale Hargrove and Joe Maxwell of Three States Supply, Robert Clark of Mid-State Air Conditioning, and Lee Watson of Watson Heat & Air.
THE SELLING DILEMMA
One of the issues facing contractors today is the current economy and what customers can afford to pay for replacement HVAC equipment or parts. On one side of this issue are the people who have a certain amount they can spend on equipment and cannot afford an upgrade because of their income or credit history. On the other side are the people who can afford upgrades but need to be sold on the upgrade or “consulted” in order to make the sale.“Now is the best time ever to sell higher-efficiency equipment,” said Gray. “The higher that utility costs go, the easier it is to justify the cost of higher-efficiency equipment.”
Watson had a differing point of view. “You’ve got to make people happy based on what they can afford,” he said. “If they live in poverty, you can’t sell them a $6,000 system, but you can sell them a $4,000 system. It is easier to pay $20 more a month for utilities than to come up with $2,000 in one lump sum.”
Ward said she understands the problem because, as she put it, a lot of her generation has spent all of their disposable income they have and there is little left for HVAC equipment. Ward said she won’t win the battle for people who are looking for the lowest-priced equipment. But Ward added, “If I go into a house where the people are working hard and can’t afford to pay more, but can appreciate spending $1,000 to $1,500 more with me than a competitor, then I can probably find a way to work with them.”
McKinzie said when he started in the business he was known for “selling cheap.” He said he may take a few lowball jobs as an exception, but he has overhead that he has to maintain and prices his jobs accordingly. “I’ve been through that mess before and have been in arrears to the supply houses,” he said. “I am not going to chase that Hyundai down the street to get that guy’s business. My market is high end, and that is the market that I am continually chasing.
“If I can’t make margin or overhead, I will refuse the job.”
The contractors talked about customers who may not be able to pay with cash or credit cards - and if it is worth it to find other financing options for them. Thompson said it was his responsibility as a key business owner in Nashville to offer the best financing package to his customers. He said he owes it to them. He uses financing through the local utility and said that one of his customers who took advantage of the financing was amazed by her first utility bill.
“She told me the bill was actually less than what it was before we installed her equipment,” Thompson said. “But there are customers I just cannot service. And the market here is wide open for good contractors who are willing to say that they are probably too high-priced for some of the customers.”
But Watson noted that his market covers high- and low-end incomes. Some of the low-end customers can only afford to keep cool by using window air conditioners. He brought up the point about customers calling him to install window air conditioners. He advises them to go to the big box stores, buy them, and install them. McKinzie pointed out that these could be selling opportunities to get a person financed through the local utility and to sell them a central air conditioning system.
THE EMPLOYEE DILEMMA
The topic of employees was next on the agenda. All of the roundtable participants agreed that finding and keeping good employees was a major concern. The terms “stealing an employee” and “growing your own” came up often in the conversation.Gray said that to a degree, every one of the people he has hired to help grow his company has been “stolen” from a competitor. “You can’t stop the thieving because the grass always appears to be greener on the other side of the fence,” he said. “But you can do your best by cross-training people and offering steady year-round employment.”
Clark said most of his employees are hired with little or no experience and he takes the time to train them. “It is hard finding good help,” he said. “I try to grow my own. Most of them come to me with no experience. The trick is paying them enough to stay.”
Ward joked about having a technician tree in her backyard where she could grow her own, too. It would help her fend off the “terrible technicians” and the reputation they bring with them. “Bad technicians are not only our problem, they are the customer’s problem, too,” she said. “A terrible technician can make me look bad by quoting a job for a price that is far lower than mine, even if I am doing the right thing and correctly pricing the job.”
A bad tech can cost HVACR contractors more than just money and a reputation - a bad tech can impede business growth. “I want to grow my business and I need the best employees to do that, which includes having them drug-screened, background checked, and fingerprinted,” said Thompson. “I install A.O. Smith water heaters, and I’m required to have my people checked out. If I want to work in schools, my people have to be checked out. It costs me money to do all of this but I want to get the business.”
Attitude and personality are also very important - much more important than mechanical aptitude, according to Thompson. “I’ll pay for a person with 20 percent mechanical ability,” he said. “That other 80 percent is what is extremely important to me. You can build your business around a solid person. I don’t care how good a person is mechanically, if he has a horrible personality, he will cost my company business.”
But Watson still believes in a person’s ability to solve problems and work a regular schedule. He said, “Give me somebody who will work 40 hours a week for me and I’ll be happy to pay them $26 an hour. But what am I paying a tech for if I have to go out there and solve the problem myself?”
“It is hard to find true loyalty anymore,” said Maxwell. “We will pay to train people and 40 percent of them will stay but the rest will thank us for the training and say, ‘See ya.’”
Training is available to employees who show a commitment to the trade and are willing to stay with their employer. Ward said ideally she would like to bring someone in who, for a year or two, would work in the field from 8 a.m.-12 p.m. and go to school in the afternoon to learn the things that she can’t teach them. “I don’t have time to teach them,” she added.
McKinzie said when he finds the right person who is committed he will send them to night school and pay for their schooling. “We are planting seeds for the future,” he said. “But every time you get a good one, he ends up opening his own business.”
Broyles said the problem is a generational thing. “The younger generation wants what the older generation has, but they don’t want to work for it,” he said. “They say ‘I want $27 an hour now, but I don’t want to pull a vacuum or charge a system.’ Or if you want to give service to a lead tech to expand their knowledge, they don’t even want to do that. They just want to do installation or service, but not help to do the other.”
McKinzie said the employees have to do whatever it takes to “make the machine run.” If there is no service one day, they will do installations that day. If they can’t abide by that philosophy, they can find work somewhere else.
THE RISING COSTS DILEMMA
Pricing a job and finding employees are two elements that can often be controlled by business owners. It’s the items that cannot be controlled that are causing a lot of problems today - namely the escalating costs of equipment and the means to transport it.Fey said there are two main reasons why prices have gone up so much and will continue to rise.
“Every major manufacturer is telling us that China is coming online and tapping into the world resources of copper and steel,” he said. “There is a greater demand now. It is not only fuel prices that are rising, but it is raw material prices.” The government plays a role, too, he said. “Government intervention in this business may be good but it has escalated the cost of doing business.”
McKinzie noted that the government has a hand in the phaseout of R-22 and the results are some surprisingly higher prices. “Does it cost that much more to make it or package it?” he asked. “It costs more to ship it yes, but is it that much more? The price is escalating because the federal government has mandated that R-22 has to go.”
He said ultimately the customer will pay for the higher prices, but he still believes that manufacturers and distributors can help him out, too. “Does a 3-5 percent price increase bother me when it comes to selling a job?” he asked. “No. But if I buy a million dollars’ worth of product, now let’s talk about what that 3-5 percent means.”
Ward used the example of 3-5 percent price increases to make her point - that everyone has to do their part to keep costs down. “Do manufacturers and distributors need a 3-5 percent increase?” she asked. “Could they get along with a 2-4 percent increase? I’ve done my part to slash costs, but have the manufacturers and distributors done their part, too?
“I’m comfortable knowing that my distributor and manufacturer are not taking advantage of me. And I know I am not taking advantage of my customers. That makes me comfortable telling the customer that this is the best I can do for them.”
Publication Date:09/15/2008
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