Additional Services Spike HVAC Contractors’ Bottom-line Revenues
The economy is constantly changing, and though experts predict a good year for HVACR contractors in 2018, many of them are adding or expanding services to help combat the unpredictability of consumer spending habits.
“With the adoption of the HEAT Act, there’s now plenty of government incentives to stimulate the economy, especially in our industry,” Paul Stalknecht, president and CEO, ACCA, recently told The NEWS. “We’re really excited about that opportunity, and the fact that more and more contractors are recognizing the need and the mindset to own the home. We’re seeing more getting involved in more areas of the home, like the whole-house building envelope, home automation, pest control, security systems, and even some that are getting involved in media and sound systems for the home. Those of them that do that have a tremendous upside in their business for the coming year.”
For service contractors, there are many reasons to expand offerings to include another trade. For Jimmy Hiller, president and CEO, Hiller Plumbing, Heating, Cooling, and Electrical (PHCE), Nashville, Tennessee, it was because he wanted the job done the right way.
Hiller started his company in 1990 after getting his master plumbing license with only $500 and a pickup truck to his name. The company now has 14 locations throughout Tennessee, Kentucky, and Alabama.
“I started off just in plumbing,” Hiller explained. “I had a local HVAC contractor who approached me, offering to share resources to help grow both businesses by referring my company for plumbing work and his company for HVAC work. It seemed like a pretty good plan, and that’s what we started doing. Now, this was early in my career in 2002. At that time, I was a dispatcher on Saturday. A call came in for water coming through the ceiling, so I dispatched a plumber. When he got there, he discovered it was a condensation drain that had stopped up on the second floor and was pouring in through the second floor ceiling. I picked up the phone, called the owner of this HVAC company, and left him a voicemail. This was about 1 p.m. on Saturday, and I did not get a call back from him until Monday about 10 a.m. That’s what made me say, ‘If I want to be in the HVAC business, I’m going to have to do it myself.’”
Hiller started offering HVAC services in 2003. Electrical services were added in 2012, after the small company Hiller was subcontracting with asked him to buy them out. The two electricians running the business then came to work for Hiller.
“If you look at what we do, we try to acquire customers, and we try to acquire homes,” Hiller said. “If you do a good job in one of those trades and take care of the customers, adding those other trades is a little bit easier because you’re already in the home. We’ve expanded our offerings to homeowners. So when we’re out there doing work in one trade, if they need other services, rather than referring somebody else, we just take care of it ourselves.”
According to Hiller, HVAC services, plumbing, and electrical accounts for 60 percent, 35 percent, and 5 percent of the company’s revenue, respectively.
CURRENT CUSTOMER RELATIONSHIPS
Orem, Utah-based Any Hour Electric, Plumbing, Heating, & Air was founded in 1961 as a 100 percent electrical new construction company. Any Hour started its service side 12 years ago and added plumbing and air conditioning eight years ago, according to Wyatt Hepworth, company president and CEO.
“On average, nationally, a customer only needs an electrician one in seven years,” Hepworth said. “We joined Nexstar Network and started going around visiting electrical, plumbing, and HVAC companies around the nation. We realized that with plumbing, they needed somebody every two to three years, depending on the age of the home, and in HVAC, they needed somebody every year with tuneups and preventative maintenance. We were already servicing quite a few residents and referring all the outside work to friends of ours. We realized we could service the exact same customers we were handing over to all of our friends.”
After adding plumbing and HVAC services the same year, Any Hour grew from a $2 million business to a $40 million business over the last eight years.
“It was not difficult because we brought in the right team,” Hepworth said. “We had a high-quality name in electrical, and we knew we wanted that high quality with the other trades. We were able to bring in people very quickly, and we started contacting customers, letting them know we were offering other services.”
Any Hour went from 10 employees to 200 in the last eight years, and as an added benefit, employee retention also went up, Hepworth noted.
“Our retention went way, way up by having all the trades,” he said. “Retention doubled from 45 percent to over 90 percent. Also, our employee referrals went through the roof simply because of all the technicians they knew from other trades. About 86 percent of all of our employees were referred in by someone who is working here right now.”
According to Hepworth, Any Hour worked on approximately 80,000 customer homes in 2017 — many more than it would have been able to do with only one service offering.
SOURCE OF ONE
Mike Agugliaro, former co-owner of Gold Medal Service, East Brunswick, New Jersey, and founder of CEO Warrior, established his business in 1994 as a purely electrical service company. In 2004, Agugliaro and his partner added plumbing, HVAC, and drain cleaning all at the same time.
“We went to do a job for a very loyal customer of 10 years, and I went to look at something and saw they had their whole kitchen redone,” Agugliaro said. “I asked them who did their kitchen, because we weren’t hired for the electrical work. They told me the plumber had an electrician in his company, and it was just more convenient. So, I started thinking to myself, if we don’t want to lose those jobs to convenience, we need to be what I now call a ‘Source of One.’ You need to be the everything or as many things as that customer can come to you for, so they don’t go out to other places.”
Mike Ritter Jr. is the owner of Great Lakes Heating, Air Conditioning & Electrical Inc., South Bend, Indiana, and one of The NEWS’ 2017 Best Contractors to Work For. Great Lakes was founded in 1957, but Ritter and his wife purchased it six years ago.
According to Ritter, the company has been doing water heaters since 1989 and added water conditioning and electrical services eight years ago.
“I got my master electrician’s license, but finding someone we trust to do it full time has been difficult,” Ritter said. “We’ve trained some of our HVAC guys to do basic electrical work, such as generators and upgrades here and there. And we did start a maintenance agreement for electrical and sent it out to our maintenance contract renewals. We got a 12 percent response in adding that service onto their maintenance agreements, so you can see what customers are willing to add on — you just need to let them know the option is available.”
Ritter got the idea to add electrical services from his training meetings, where techs show pictures taken on job sites.
“They all vote on which is the craziest picture,” he explained. “They were bringing in tons of pictures of messed-up electrical in basements — panels that were overloaded or light fixtures just hanging in the basement. And I was like, ‘You know, we need to be fixing this for these customers because that’s a real risk they have for an electrical fire or a kid getting his finger stuck in an electrical outlet that doesn’t have a cover.’ That spawned the idea of we can do this stuff, it’s a benefit to the customer, and we’re already in the home.”
In addition, Ritter also decided to add on attic insulation to his company’s offerings just last year.
“The HVAC business is very seasonal, and attic insulation ties in with what we are trying to do in making homes more efficient, people more comfortable, and saving money on utility bills,” Ritter said. “We bought the machines and everything, but we priced it higher than the local marketplace during our ‘busy’ season, so if we were doing it then, it was worth our time. We were making a good profit, but we always encourage customers who were interested to let us put them on the schedule during what is historically our ‘slower period’ for a good discount. That allows me to keep my technicians busy when we don’t necessarily have good HVAC work, and it helps with my overhead. This was our first full year doing it, and it has been great.”
According to Ritter, for a contractor thinking about adding or expanding services, it’s imperative to find the right employee.
“It’s a no-brainer — make sure you find the team member/employee who can do the work for you,” he said. “We’ve got the calls, we’ve got the work, but we’re not fully able to capitalize on the vast opportunities that are out there because we lost our employee. We’re trying to hire people now, and we’re sending our current employees to training to get them certified, but that will take a few years.”
Hepworth stressed the importance of demonstrating patience when hiring.
“Don’t worry that you won’t be able to get to all the calls,” he said. “Just take the steps forward and hire a person who knows what they are doing, and be willing to pay the money to build a high quality of service. I think people overcomplicate starting new departments. It should be easy.
“We already have the customer database, we’re already running some kind of system where we’re going to people’s houses and doing work for them, and we’re already technically trained in a trade,” Hepworth added.
Hiller also advised contractors to find an expert in the services they are expanding into.
“If you don’t have the technical skills, having an expert in the technical side of the business is absolutely critical,” he noted. “The other thing is, I would find a mentor. I’ve been blessed to have had several mentors in my life. It goes back to how you can be a smart contractor, learn from your mistakes, and never make them again, or you can be a wise contractor, get a mentor, learn from the mistakes they’ve made, and never make those mistakes at all.”
Agugliaro added that in today’s world, where convenience is prized above all, the old way of doing business has become obsolete.
“If you only specialize in one thing — one trade — it’s the kiss of death,” he said. “Before Source of One, we called it a one-stop shop. There’s always a place for a store that just sells meat. But, if you look at the largest companies in the world, it’s not a meat store — it’s Costco and Sam’s Club. I believe it’s the kiss of death because it is difficult if there are any ups or downs in business. Also, I don’t think you really have a choice anymore because there are so many people subscribing to the one-stop shop/Source of One philosophy. If you’re just a plumber, and the other company does plumbing, HVAC, and electrical, and I have a need, why would I ever call the guy who just does one thing? This was a good philosophy 20, 30, even 40 years ago; they used to call it a niche — be in one niche, and do it very, very well. My philosophy is do many things, and do all of them very, very well.”
Publication date: 4/9/2018