The 1997 Contractor Success Group (CSG) Contractor of the Year is happy to be part of the R.S. Andrews team. He puts a lot of faith in the upstart Atlanta-based consolidator.

“If Andrews was just into hvac work, I’d probably stay independent,” he said.

Fact is, R.S. Andrews offers home services other than hvac equipment installation and service. The list includes pest and termite control, plumbing, and electrical work. (See accompanying article below.)

The labor issue and consolidation

King acknowledged that it is hard to find qualified help in the Knoxville area. Unemployment is low and the demand for hvac workers is high.

King said he owes some of the problem to his company’s policy on drug testing.

“I’d say about one-third of our job applicants don’t show up for the interview because of drug testing,” he said. “There’s probably only one other local hvac company that does drug testing.

“Most of my service techs have come from Florida and Texas,” he continued. “My service manager came from Texas 10 years ago.”

King said he believes that the benefit package offered by R.S. Andrews will make him more competitive and that he tries to pay his people a “little more than the average company — about one-third more.”

The benefits package was one reason why King turned to this consolidator, but there were others. He said he liked the “family atmosphere” of the business. There are not a lot of egos involved, he said.

Screening process for consolidators

“I met Mark Pederson [Andrews senior vice president of corporate development] through the Energy Star program,” he said. “Mark invited me to Atlanta and I met owner Steve Andrews. I was impressed with Steve and his Excalibur business management software.”

King said he took his time and studied Andrews. He did his “due diligence” on the consolidator, using many of the same investigative procedures that consolidators use when they research potential acquisitions.

Air Professionals became the first R.S. Andrews acquisition, but just barely. The second acquisition signed on later that same day. As of this printing, King is looking to tuck in two other local companies under his leadership.

“I’ve never looked back since we closed the deal,” he added. “I have felt very comfortable with [R.S. Andrews].

“My employees were a little frightened about the acquisition at first, but I’ve always had a close relationship with them. I told them that I wanted them to retire with a good plan because I know I’m going retire with a good plan.

“A few of my people didn’t understand why I would want to have a boss again when I was doing so well.”

He said that Andrews management has not interfered with how he runs his business. “I’ve never been told directly to do any one thing. I am responsible for the profits, so I have the final say in 90% of what goes on.”

King said he had talked with Service Experts before settling on Andrews, and that one of his local competitors soon joined Service Experts after King said no to them. He added that he wasn’t surprised by the acquisition of Service Experts by Lennox.

“I suspected that Lennox was thinking about the acquisition a long time before they actually did it.”

Although this is the first example of a major manufacturer buying a group of contractors, King downplays the significance of switching brands to compete more effectively. He said that too much emphasis is put on the issue of branding.

“If a customer bought from me because of the brand I sell, then I’m not doing my job very well,” he explained. “We prefer to sell the value of doing business with us. We don’t carry manufacturer’s literature, and we’ve never had a brand name on our trucks.”

Knoxville climate

With a good job market and thriving employers like the Tennessee Valley Authority, Alcoa Aluminum, and the University of Tennessee, the economy here is looking pretty good. The coldest it gets is around 35ÞF, and there is a minimal amount of snowfall.

Overall, conditions are ripe for growth.

“West Knoxville is growing so fast you almost can’t keep up with it,” said King. “They’ve almost run out of room to grow and may have to expand into the next county.”

King said his company will do $2.5 million in revenues this year and he would like it to be a $5 million company by 2002.

This is the basis for his lofty goals:

“People in Knoxville are sick and tired of bad home services. There are too many cases of calls not being returned and just plain bad service. Price is important but it is not the main issue. People are looking for a business they can trust.

“Some of the local contractors mean well, but they just don’t present a professional appearance. Their people have long beards or the ‘I just forgot to shave’ look.

“Knoxville is ripe for the way we do business. I plan to dominate the whole east Tennessee area.”

Financing, selling windows

King said it’s been a good year for his business. He is especially impressed with the amount of work that is financed by his customers — about 98%.

“From day one, I’ve always encouraged my customers to finance the job,” he said. “Customers are willing to spend more if they don’t have to come up with the cash up front.

“People are price conscious, but if you go into their home and give them three different options for a new system, and sell yourself and your value, it is very rare that they will pick the cheapest.”

R.S. Andrews offers a “Worry Free” financing program, and has an added attraction that has given King the extra push he has needed to close some sales — a replacement window business.

“Replacement windows have helped our business a lot. They are every profitable,” King said. “We’ve gotten a lot of jobs because we can offer windows in addition to our regular products.

“If you’ve installed a 14-SEER air conditioner and 90%-efficient furnace and left the old windows in, you’ve really done your customer a disservice. Extra insulation and replacement windows are one more way to keep another business out of your customer’s house.”

King said he would be willing to offer any add-on products a customer wants in order to make a sale. He even has plans for constructing a new showroom to accommodate walk-in traffic.