Although HVACR contractors still list the “usual suspects” such as the labor shortage and a highly competitive market as two of the biggest issues facing the trade in 2003, there are other issues looming on the horizon.

The News asked contractor group members from Excellence Alliance Inc. (EAI), AirTime 500, International Service Leadership (ISL), The Unified Group, Contractors 2000, and the Linc Corporation to comment on industry issues and the economy, and asked them for advice on keeping busy during slow times and periods with moderate temperatures.

Jim Norris

Key Issues

“Finding ways to build on customer satisfaction and building strong customer relationships is probably the biggest issue facing contractors,” said Jim Norris, chairman of the board of advisors for Excellence Alliance Inc. (EAI), Hebron, Ky. “It is a huge challenge for contractors. Customers are expecting something out of the ordinary, and we really have to give them something exceptional.

“We are in danger of becoming a commodity industry, i.e., a box is a box is a box. Customers don’t see much in brand differentiation, although we do. Manufacturers have been focusing on retail selling, which is creating competition issues for our contractors. This ties into the commodity thing. The contractor must now maintain an even higher level of service and sell his own name.”

Tim Smerz, a managing partner of The Unified Group and president of Air Comfort Corp., Broadview, Ill., believes that competition from retailers will have a negative impact on contractors’ profits. “If the equipment is pre-purchased by the customer, the contractor is just selling his labor, which tends to make the job less profitable,” he said. “And maybe the equipment is specified wrong or being used in the wrong application. Contractors shouldn’t be tied to one brand of equipment and should be able to recommend and sell what they can negotiate for the job.”

Scott Giacobbe
Scott Giacobbe, president of the Linc Corporation, Pittsburgh, said that at the end of the day, customer satisfaction is the key issue.

“The bottom line is that it’s all about the customer,” he said. “If you take care of the customer and give them what they want and what they need, you’re doing the right thing. I met with Linc’s Advisory Council in December and then again in January, and they said that two of the key things that drive their businesses are having a passion for delivering service and taking care of their customers.”

Mike Moore, vice president of ISL, Brentwood, Tenn., agrees that the major issue is attracting and retaining customers. “Customers are more savvy about their money today,” he said. “And they don’t have as much brand loyalty as before.

“The industry is saturated with competition, and we have to be better with services such as selling IAQ. IAQ was a $2 billion dollar business in 2002 and could grow to $12 billion by 2012.

“Mold is also a big issue because every contractor potentially faces legal and liability issues when it comes to mold. Educating the contractor on this issue is a key — as well as educating the customer.”

Tom Wittman, an ISL coach and trainer, echoed some of Moore’s comments. “Keeping your people in front of your customers on a year-round basis will be a predominant part of business,” he asserted. “Successful companies will need to determine how they can maintain this presence on a consistent basis. They can’t just wait for the phone to ring.”

“Contractors cannot ignore IAQ issues,” said Smerz. “We need to become better informed and knowledgeable in order to consult with our customers and advise them. We need to partner with outside resources to bring in that expertise.

“We need to become more proactive rather than to respond to IAQ problems, such as complaints by building occupants.”

Greg Niemi, president and chief operating officer of Contractors 2000, White Bear Lake, Minn., maintained that economic issues should be foremost in the minds of contractors. “I believe issues of IAQ, mold, etc., have temporarily taken a back seat to the economy,” he noted. “Fiscal responsibility is paramount. The strong will get stronger and the fiscally mismanaged shall perish.”

Smerz pointed to direct digital controls as an increasingly important issue. “There are so many systems that will need retrofit out there, and with the new open protocol systems available, there is a huge opportunity for contractors,” he said. “Technology is more affordable, and you will see smaller commercial customers — i.e., a three-story building or small shop — turning to control systems.”

The Economy

“People’s needs change according to the economy,” said Jim Abrams, co-founder of AirTime 500, St. Louis. “People will call for repairs when something breaks.

“Contractors have to learn how to survive with the customers they have today, and they have to tighten up and run with a minimum of debt.”

“A sluggish economy has more of an impact on the service and replacement market than the new construction market,” stated Norris. “People have already made their decisions about building a house or a new plant, and I don’t believe a downturn in the economy will change those decisions.

“The replacement business will be affected because there is a wait-and-see attitude by consumers, who are contemplating discretionary spending. People expect a really great price now and a really good value.”

“People don’t have a choice,” said Smerz. “They need certain temperature conditions in their buildings, despite the economy. New construction is the most dependent on economic conditions, with building construction postponed or scaled back by a downturn in the economy.”

“The war has an uncertain effect on the stock market,” noted Moore. “And an uncertain stock market makes people nervous. And when they are nervous, they don’t spend money like they would usually do. If the war ends in a hurry, this situation can turn around quickly.”

Wittman said that contractors who position themselves in front of their customers would be the ones who succeed during slow economic times. “Consumers’ decisions will be based solely on the advice given to them from the service technicians in their homes,” he explained.

The Weather

It isn’t just the economy and global unrest that contractors have to deal with — it is also the up and down business cycles associated with the weather. Norris had a simple response.

“The easy answer to getting away from weather dependency is to get into the service contract business,” he said. “The real customers are those who contractors have a service contract with. The others are available to anyone. You should take an ownership attitude with the customer, and you must convince them that you have their best interests at heart.”

Niemi again stressed that the economy is what contractors should gear up for, not the weather.

“Weather will always be a factor in the HVACR market, but — and I mean but — the general U.S. economy is always a bigger factor,” he said. “The key is to have the systems and tools in place to turn on and turn off your marketing during sluggish times, whether it is a cycle in the weather, economy, or both.”

According to Giacobbe, weather cycles should not pose a problem if contractors follow a basic philosophy. “Exceed the customer’s expectation and always go for 100 percent quality,” he said. “Make sure your customers are truly happy — delighted, in fact — with the services that you’re providing. Become an industry expert and a valuable resource for your customers.”

Labor And Education

“I still believe that the best training is on-the-job training,” said Norris. “There are very few schools that are turning out highly competent, fully trained students. We need to have certified technicians, and I don’t see a lot of kids coming out of school who are ready to be certified.”

“For the last decade, our industry has not done a good job of promoting the trade to young people,” said Smerz. “It seems that we get a lot of sons of pipefitters and sons of mechanics and not enough other young people.

“Our company hires people from outside the industry, and we make a lot of good education and training available, and we properly train them, bringing them up to speed with the technical knowledge they need. Contractors who are committed to getting better spend a lot of money on training their people.”

“We always look for training ideas from our members,” said Julie Bishop, executive director of The Unified Group. “We have a training committee and they give us input as to what they like us to try.”

“If you have an educated technician, it reduces the amount of callbacks and increases the amounts of first-time completed jobs,” Moore said. “This means the worker shortage is less of a problem because less time is spent going back to jobs. And companies with a great training program can make worker shortages nonexistent.”

“Fifteen or 20 years ago, a technician was a person who just went out and fixed things,” stated Wittman. “Now, with all of the IAQ issues, there is a different paradigm, where technicians deal with all kinds of indoor comfort issues, such as, ‘Is the house safe and environmentally friendly?’ This holds a tremendous amount of opportunities for a different type of workforce.”

Giacobbe thinks that his organization has taken the steps necessary to find qualified employees.

“A lot has changed over the past two years,” he said. “We don’t really see a labor shortage. I think there’s been more brand identification/brand recognition of the Linc Service name; potential hires recognize that [our] methods are based upon a quality system.”

Abrams believes that contractors themselves can be the biggest roadblock to developing a full staff of qualified technicians. “People who complain about the lack of technicians aren’t willing to pay for good technicians,” he said. “I’m sure that the best contractors don’t have a labor problem.”

Publication date: 05/05/2003