'I didn't want to compete with them alone'
Â Â Those are the words of Tom DiPietro, president of Climate Design Systems, Inc./Service Experts. DiPietro was describing the acquisition of his business by Service Experts, soon to be part of Lennox, Inc.
“It was an exciting opportunity to try a bigger pond,” he said. “The challenge wasn’t like it was [before the acquisition].”
DiPietro, whose business serves the residential and light commercial service and design-build markets, has been paying a lot of attention to the changing landscape in the hvac trade. It has prompted him to make changes in his own business.
“I saw the challenge coming from manufacturer and vendor consolidation,” he said. “I didn’t want to compete with them alone.”
So now DiPietro is a Service Experts man and will soon be part of the Lennox family, the main competitor of his former business. How will this new twist affect his long-range planning? Stay tuned.
Ups and downs in Boston marketThe Boston market is a little different from the rest of the country, according to DiPietro. “This market is made up of a whole bunch of smaller companies. It is a highly competitive market.
“Another unique feature about this market is that too many distributors sell custom-made ductwork,” he continued. “We are not only competing in this market with the major equipment manufacturers, we are also competing against ductwork makers.
“Now you don’t even need a shop to compete. This encourages people to enter the business without making any big capital investment.”
With low unemployment in the Boston area and in the midst of some major urban redevelopment, it would be safe to assume DiPietro is hard pressed to find enough people to staff the many projects this $12 million contractor is involved in. But that’s not the case.
“I hate to be a contradiction, but we’ve been very fortunate in finding help,” he said. “We are fortunate because we’ve been around for a long time and Service Experts has been an enhancement. We just ran an ad for help and didn’t expect much, but we wound up with 15 applications.
“People see opportunities here. Our people range from college-degreed to helpers who have gone into entry-level apprenticeships. We let people know there are opportunities everywhere in the country.
“There are corporate opportunities for people who have been here 10 years. Tradespeople want to advance, and they want to take advantage of the educational opportunities they have here.”
Residential growthDiPietro thinks the added appeal of Service Experts has strengthened his place in the market and allowed for expansion, too.
“We opened up a full, dedicated residential division across town that handles our service and employs 40 people,” he said. “We’ve been in an expansive market and now we are very focused on our residential division.”
DiPietro said his company will continue to play to its strengths in the commercial markets, but with the help of Service Experts, the residential market looms as a very lucrative business. Residential sales have grown from $750,000 in 1998 to $2.4 million in 1999. DiPietro projects sales of $4 million in 2000.
“I felt that residential service was extremely ripe for the taking and my marketing plan was very similar to [Service Experts]. Their business plan was focused on the residential area and that worked for me.”
DiPietro still enjoys the freedom of running the business. His association with Service Experts gives him a comfortable level of independence. “I saw this as an opportunity to see if I can rise up and meet the challenge.”
Facing the utility challengeIn the constant push and shove for market share, spearheaded by acquisitions and mergers by manufacturers and utilities, DiPietro believes everyone can share the wealth. “The pie is big enough for all of us. We can all fit into a market that is comfortable for us.
“We are trying to stake out a market from middle income and up,” he added. “We are not going to concede this market to anyone.”
Does DiPietro see utilities as a formidable competitor? Yes. Does he think they have a competitive advantage and are playing fairly? “I think in some areas they are playing fair and in other areas, they are absolutely not playing fair.
“A local utility is doing service work at rates that are lower than its sister, unregulated service company. I’m competing with Service Edge, a deregulated company owned by Boston Gas, and Essex County Gas, a regulated company owned by Boston Gas.
“We’ve planned for this and we have to learn to deal with it.”
DiPietro sees a lot of room between himself and his competitors. The walls aren’t closing in just yet. “The market is huge and explosive, beyond description,” he said. “I believe there are opportunities we will never see again.
“This industry right now is where IBM was in the 50s. We are playing for big stakes.”
DiPietro credits the Internet with creating an informed customer who is now asking questions about indoor air quality and related health issues. He feels that educated consumers will kick up the demand for heating and cooling professionals and this may pose a problem.
“The demand could swamp the available talent out there,” he said. “You better get a gauge on what the customer wants or you can kiss the sale goodbye.”
Tom's keys to successOne of the keys to success is attracting and keeping new people while stabilizing your company, according to DiPietro. “People should have the freedom to attain the highest level. We should allow our people to reach out and think, while playing on the same team.
“Ultimately, this is a people business. We must provide a good working environment and good opportunities while treating people with respect and understanding.”
DiPietro wants to build his company into a major service center for Service Experts. He wants to see what happens after his three-year contract with that consolidator expires.
Now that Lennox is the new owner ...DiPietro, who serves as a contractor consultant for The News, joined the family of Service Experts’ managers who recently learned the news of their acquisition by Lennox. DiPietro has had time to reflect on the changes, if any, since the big news hit.
“The combination [of Lennox and Service Experts] creates a very large U.S. and Canada dealer network, giving employees opportunities to solicit or find other jobs in most major cities in North America,” DiPietro said. “Additionally, there may be opportunities with the parent company both nationally and abroad.”
DiPietro said the company-wide reaction to the acquisition was generally positive, with one reason being that both companies share a “family-owned” history and have established, successful managers.
“The acquisition makes sense because many of the service centers were former top-performing Lennox dealers,” he said. “And because Lennox has a major manufacturing arm, the business will have more balance than the strictly hvac installation component.”