TEXAS TWO-STEP

“HARDI’s mission is to make wholesale distribution the channel of choice for HVACR manufacturers and contractors,” Gee said. “If we’re not doing that, we’re eroding our own value, and we don’t have much reason to be getting together every year.”

To meet these needs, Gee challenged the entire industry to ensure two-step distribution remains the HVAC supply channel of choice.  

“For the suppliers in the room, you have a new directive,” Gee said. “You have an obligation to tell us when wholesale distribution is not serving your needs. This is not a request, it’s an obligation.”

While each link in the supply chain may not agree 100 percent on the explanation or rationale behind every decision, Gee insisted wholesale distribution must be alerted if and when it’s failing to meet the industry’s demands.

“How can we make this channel the only one you want to go through?” he asked. “We don’t want most of the channel; we want it all. What do we need to do to be able to accomplish that?

If you’re considering going in another direction, tell us why. Tell us what we need to do better. That is our mission and will remain the cornerstone of our organization going forward.”

BUSINESS, NOT BULLETS

At the age of 25, Matt Griffin was one of the deadliest men on the planet.

As a member of the U.S. Army’s 75^th Ranger Regiment, he had direct access to B1 bombers, AC-130s, A-10s. the heaviest of heavy artillery was attainable at the snap of a finger.

When conducting direct-action raids deep within hostile environments, the stakes were high: kill or be killed.

“If you found yourself surrounded by hell, you were likely on the business end of whatever we were doing,” said Griffin, who served as a rifle company fire support officer.

Following five years of death and destruction that led him through three deployments to Afghanistan and another to Iraq, Griffin grew tired of the chaotic military lifestyle. He began to view the countrymen he was charged to kill as people rather than targets. In order to truly help, he needed to transition from an invader to a visitor and friend.

Shortly after leaving the military, Griffin returned to war-torn Afghanistan as a medical equipment salesman. The sight made him sick to his stomach. The factories that once paid hundreds of locals to churn out the essentials of war now sat desolate. While the military machine had rolled into another country, replacement jobs never arrived.

Griffin felt inspired to somehow fill these facilities with opportunity. Looking down at the floor of the empty factory, he grasped the sole of a boot in one hand and a sandal thong in another.

In that moment, the former contract killer’s life flip-flopped. Literally.

Now, as the owner of Combat Flip Flips — an apparel company that specializes in creating footwear out of boot soles for those affected by conflict — Griffin has traded in his bulletproof vest for sandals, shemaghs, and sarongs. He now adheres to the mantra, “Business, not bullets.” Even his email signatures are punctuated with #Peace.

Griffin shared his story and offered a bit of inspiration for those in attendance as a keynote speaker.

“The hot word right now is intent,” said Griffin. “What’s your intent? If you know what your intent is, and you write it down, you’re more likely to achieve it. If your customer has a problem, ask them what their intent is. You’re way more likely to help them achieve a goal if you know what they’re aiming to do with it.”

Griffin said success — whether it’s achieved in the military or as a small business owner — is built on the process of overcoming failure.

“A legacy doesn’t appear out of thin air; a legacy is forged,” Griffin said. “Consider the phrase: ‘Through the fire, the steel is forged.’ Coming from a military background, I always visualize how a sword is made. It’s melted down in 1,500°F heat and hammered out. There’s a lot of sweat equity that goes into that. That process of taking a piece of raw material to the point of failure and constantly molding and shaping it until it’s absolutely perfect takes time and effort. That is how a sword is forged. That’s how steel is forged. That’s how a legacy is forged.”

While people can’t jump into 1,500° fire, Griffin insisted failure is a primary step in the human forging process.

“We forge through risk and evolution,” he said. “You have to be willing to be subject to heat, willing to fail, and take the beatings if you want to get stronger and faster. You’ve all done it before. You didn’t get to where you are today without failure. You’ll fail again, too. It’s how you overcome that and grow — that’s how you forge a legacy.”

ECONOMIC OUTLOOK

Alan Beaulieu, president, ITR Economics, provided an economic forecast for attendees on the conference’s third day.

The moral to his presentation: Distributors should not expect a repeat of 2018 in 2019.

“Consumers are going to be price-conscious in 2019,” he said. “Housing starts will continue to slow, and existing home sales are expected to plummet. That means there will be fewer remodeling opportunities, and consumers may be less likely to spend serious money with you next year than they were in 2018.”

Beaulieu said 2019 is shaping up to be a good year for HVAC owners to work on their businesses rather than in their businesses.

“Interest rates will continue to climb and inflation is always a concern, so I suggest you borrow as much as you can now to invest in your company,” he said. “If you want a new CRM, do it in 2019. If you need to upgrade your website, do it in 2019. If you want to add some more marketing, do it in 2019. Use your time next year to prepare for the fallout that looms in the 2020s. Figure out what you need, and who you need, to be busier than you are today and spend the money to make it happen.”

Beaulieu said this additional spending will better prepare distributors for a looming recession, which he anticipates taking place in 2022.

“GDP is flattening out,” he said. “As it flattens, this will have an impact on businesses, consumers, and commodity prices. In 2021, the rate of growth will slow down considerably. This will lead to a significant recession by 2022. This downturn will be significant, though it won’t be as significant as 2008-2009 was.”

While President Trump’s Tax Cut and Jobs Act provided a short-term boost in 2018, Beaulieu believes the tax legislation will not have a lasting effect.

“The tax change will not provide a boost in the economy for any length of time,” he said. “I like many of the changes in the tax code, such as the reduction in categories, and some people are seeing lower rates. Honestly, it's helped some people and hurt others, it just depends on the tax bracket you’re in. Regardless if it’s a personal win or loss, in the end, it will all balance out."

For those considering selling an HVACR distribution business, Beaulieu suggests waiting six or seven years.

“With all this talk of a recession and a Great Depression in 2030, the best time to sell a business would be somewhere around 2025,” he said. “Make sure you pull the trigger before 2029, as there’s typically a three-year earn out, and you don’t want to have your earn out during that 2030 Great Depression. And, I’d suggest you sell it to someone you don’t like, as it's going to be worth much less in the 2030s than it was in 2025. Then, aim to buy it back in 2033, when its price has hit the floor. Make the most in your sale, buy it back cheap, and then enjoy the economic recovery of the late 2030s.”

Publication date: 12/18/18