In the HVACR industry, there can be a double whammy in these difficult economic times. First, contractors can find themselves going out of business. And, second, their customers then will need to find another reliable and trustworthy contractor.

One company offering a way of dealing with that is Smith Services of Vero Beach, Fla. Its objective, according to an item in Inc. Magazine, is to “buy up HVAC competitors who are struggling because of the economic slowdown.”

Over the past five years, the contractor has acquired some 23 businesses and is using the customer lists to allow it and its 50 employees to survive in the especially challenging Florida market.

“If we had not done it, we would have been in a very different situation,” said owner Chip Woody.

Smith Services started in 1974 when Richard Smith became a technician turned owner of Smith Heating and Air Conditioning. Jim Brann took ownership of the company in 1999 when Smith retired. In 2003, Woody, who has a background in banking, acquired 75 percent of the business. Brann stayed on for five years to handle the technical side while Woody focused on marketing and growth. In 2009 Robert Brown, who has been with Smith Services for several years, bought out Brann’s stock and then became the vice president of operations for Smith Services.

That growth included the acquisition mode that started with the purchase in 2003 of three air conditioning companies, two of which had been in business for 20 years and the other for five years.

“All had their niches, but it was already a difficult market in Florida,” said Woody.

Woody said contractors either come to him to sell or he learns of those about to go out of business.

The key for Smith Services is growing the customer base. “If you can acquire, then you’ve got a base to amass. What drives businesses through difficult times are new customers.”

Many of the acquisitions, said Woody, are of the “mom and pop-type businesses that, at their peak, had less than $1 million in sales.”

MORE THAN THAT

But the success of Smith Services is more than building its customer base. It still has to provide the services.

Said Woody, “Any company is only as good as its staff. The people who work for us are what truly make Smith Services so special. We provide a professional work environment and continuous training to help our staff to be proficient, have a winning attitude, and provide the best customer service.”

The company does primarily residential air conditioning, but also has commercial accounts. In addition to services for residential and commercial mechanical equipment, the company is involved with pool heaters, ventilation, humidity control, air purification, light commercial refrigeration, chilled-water systems, gas heaters, and boilers.

The service area consists of the counties of Brevard, Indian River, St. Lucie, Martin, and Palm Beach with a main office in Vero Beach and another in West Palm Beach.

MEASURING SUCCESS

Woody has a measured response in terms of the acquisition mode. “We had a difficult 2008, like most businesses. But we are finding a fair amount of our new customers are coming to us from now-defunct companies.”

And Woody knows he faces a challenge to build trust.

”Our mission is to provide quality HVAC service and strive to gain our customers’ trust to establish lasting relationships. To ensure longevity of our company, we stress exceptional customer satisfaction in all areas, and maintain the highest level of professionalism, honesty, integrity, and fairness at all times.

IN THE GAME

Woody is not alone in buying up other companies. Others are also in the acquisition market, if not at quite the same pace. Another contractor in an acquisition mode is Scott Robinson of Apple Heating & Cooling of Ashtabula, Ohio. He noted after acquiring another company recently he was “unable to retain help.”

For Robinson, the move was for “geographic expansion and growth. The existing market had a lack of growth opportunity. There are much better demographics in the new market.”

Charles Jones, CEO of Airco Commercial Services, based in Sacramento, Calif., had been seeking to grow geographically even before the downturn. He said he does so by approaching other contractors to see if they are interested in selling their businesses to him. That approach, he said, is less daunting than starting a business at another location from scratch. “We were expanding and they were willing to talk,” he said.

He had already obtained three companies that way before the economy really slowed down in 2009. Since then, he said he has acquired another company and is talking with the owners of two more.

Unlike Woody, who tries to learn of owners who might be interested in selling, Jones said he simply makes cold calls. He said he will set up lunch meetings and discuss the other owner’s age or other factors that may get them thinking more about selling.

And because of the recent economic climate, he said “cold calling has been a whole lot easier.”

Publication date: 11/09/2009