In other scenarios, businesses have been passed down from employee to employee and established owner to owner.
The two contractors highlighted in this article fit two of these molds: family ownership and owner to owner. For both contractors, the road to success has taken a different turn.
Cox engineeringWorld War I was still raging in Europe when Cox started a sheet metal shop outside of Boston. Through the years the business has changed markets until it evolved into a full mechanical and engineering firm in the late 1970s.
The company offers service and balancing for its commercial-industrial customers.
“We also have a subsidiary company, Cambridge Port Air Systems, that manufactures custom air handlers and hvac accessories,” said Jeff Chase, senior vice president of Cox. “And we have a manufacturing facility in Memphis, Tennessee.” The total size of all these facilities is upwards of 80,000 sq ft.
Chase, who started in sheet metal work and estimating, has been with Cox for 18 years. He lists some well-known names as the company’s customers — institutions like Harvard Business School, Harvard University, and financial service giant Fidelity.
Keeping the workload manageableWith sales of $32 million this year, Cox has played a major role in the commercial-industrial markets in and around the Boston suburb of Canton. Chase said he would like to increase the parts business at Cambridge, but he’s content to keep the sales volume steady at Cox. He doesn’t want to take on more than he can handle.
“Safety becomes a big deal if you take on too much work,” he said. “Besides, doubling your volume of work does not double your bottom line.”
Another reason Chase does not want to bid on more jobs is because he doesn’t want to stretch his resources — namely his staff — too thin.
“We have low turnover and we’ve been able to keep our workforce together,” he said. “Fortunately we are still able to get new work while servicing our existing customers. Our problem right now is getting people into this industry. We barely get enough people to meet our requirements.
“Kids today want to get into financial and computer companies. There’s no sex in our business. Kids want to drive BMWs, and they look at us working 10-hour days and say no way.”
Chase said he tries to get into the heads of 17- and 18-year-old students but he is discouraged by the number who don’t care or don’t qualify. He used to pass out cards and asked students to read from them. He was amazed by the number of high school students who couldn’t read.
“We even explained about the annuities which would make the kids over a million dollars when they retired,” Chase said. “We explained that they could make $28 an hour and have the best possible medical and retirement benefits and we still can’t get enough qualified people.”
He also said that compounding the problem are the older established union workers who don’t want their children to follow their careers. “They want their kids to go to college, they don’t want them in the industry.
“There is so much work in the construction industry right now that I don’t see a light at the end of the tunnel,” he continued. “There is at least three years of committed work, full employment.”
Trend watchingOther industry trends, such as consolidation, are almost equally interesting to Chase.
“One consolidator came in here and knew nothing about our business,” he said. “All he had was a pocketful of cash. But if consolidators are looking for returns on their investment, this isn’t the place to be looking.”
Chase said this business is relationship-driven; once people know a business has been acquired, they take a different attitude.
“On the other hand, consolidation is good for the business owners,” he said. “An owner can cash out with consolidators whereas if he sells the business by himself, he will have a hard time putting a market value on his business.”
Would Chase consider consolidating? “I think the loss of control and the uncertainty is there,” he responded. “I’m not saying we’d never sell, but we are not actively pursuing anything.
“I’m concerned about controls companies like Siebe and Siemens going out and trying to become mechanical contractors,” he added. “They can put a control system in a building and can therefore control that building from their own office. They can take full responsibility and sell that to the building owner.
“I see this as the biggest threat to commercial-industrial contractors.”
Rodenhiser Plumbing & HeatingHow many people remember 1928? Ask Andy Rodenhiser. He knows his great grandfather started a plumbing, heating, and supply business back then. Along the way, the company started up a septic pumping business.
“My grandfather invented electric drain cleaning, which replaced shovels and cables,” claimed Rodenhiser. “He started the Electric Sewer Cleaning Company and it became a big name in the sewer cleaning business.”
When the elder Rodenhiser died, the company gave up its plumbing license. However, Andy got his plumbing license in the mid-80s and got back into the business. Last year the company did $2.5 million in sales, mainly in residential repair and replacements.
The hvac side has been a relatively new addition.
“I decided to get into [hvac] because of the size of the market and because utilities were now creeping into the plumbing business with a water heater rental program,” Rodenhiser said. “When a utility can run commercials about their water heater rentals and my sales of water heaters drop from five units a day to two, you better believe that affects my business.”
Today Rodenhiser serves as the company president and employs 37 people. He credits those people with the company’s steady growth.
“We do a lot of training and empower our employees to make their own decisions,” he said. “These guys are little businesses unto themselves.
“The company is not me or the brands we sell — it is the people who work here.”
Hiring: Slow and steadyRodenhiser wishes he had a larger pool of talent to draw workers from, but he knows that hastily hiring someone just to have a “warm body” is not the way to go.
“If you hire the wrong person, it is almost the worst thing that could happen,” he said. “You invest a lot in that person and it may take months to replace him.”
Rodenhiser looks past the physical aspects of losing an employee. “Suddenly you’re not making your sales projections. If you lose three guys who are selling $20,000 in systems, now you’re out $60,000. Suddenly the training program you budgeted $5,000 for can’t be implemented.”
If worrying about losing employees weren’t enough, Rodenhiser sees other things going on all around him that are worrisome enough to sprout gray hairs. He has seen utilities move into service arrangements within his market.
“I’ve seen a 200-person call center marketing home appliance service agreements for $5.99 per month,” he said. “Those type of agreements are killers to a small business.”
Maintaining independenceThe new competition is one of the main reasons Rodenhiser joined Excellence Alliance, Inc., (EAI), an organization of independently owned businesses who share marketing, administrative, and training programs, as well as serving as a buying group.
“Joining EAI has allowed us to grow at a faster rate and allowed us to compete,” he said. “EAI offers a network of people to help solve service problems. These contractors have similar philosophies and care about growth.”
Rodenhiser isn’t afraid of any quick growth spikes because he knows he has the people and the expertise to weather a quick change.
“It won’t hurt me to grow at a faster rate in order to prepare myself for this onslaught,” he said. “Every day we are not getting better is a day that someone else seizes the opportunity to get better.
“The train is coming and people ought to have their ear on the rail.”
Big competitorsHe notes that the whole method of distribution is changing and there are some very big players in the hvac trade, but the Boston area has yet to see them. Recent acquisitions in his area include companies bought by industry giant EMCOR and local utility Boston Gas.
Has Rodenhiser considered consolidation? Yes, but not in the way you might think. “I’m young with a great staff. Why shouldn’t I be a consolidator? We could easily buy other companies.”
But Rodenhiser doesn’t like the concept of consolidation on a national level because he believes customer service will suffer. “Suddenly no one cares about service because they’ve all cashed out. There is no passion for what you are doing.”
Besides being approached by a national consolidator, Rodenhiser has also been contacted by Sears to join its network of service companies. He balked. “I’m really not interested in building their brand.
“Dedicating a technician and a truck to servicing someone else’s brand is too much. If it were a partnership arrangement, it would be OK.”
Rodenhiser said he is cautious who about he aligns himself with. He noted that one product manufacturer is offering training for service technicians. “I’m leery of sending my best people to them for training when they can become targets for recruiting. [The manufacturer] has a very aggressive commercial stance in the Northeast.”
Rodenhiser is an Amana dealer and said that if Amana decided to compete with him for service contracts, he’d drop them. “I have to look at what’s best for our organization,” he said.
Rodenhiser hopes to get big himself by expanding throughout New England. The key to growth is to become fully automated and bank on his employees to bring in new talent. “Our people will grow their own,” he said.
Sidebar: Contractors say people are the keys to successAndy Rodenhiser has no doubts about what is the key to his success. It’s a four-letter word: care.
Â Â He believes that showing care for his customers and “putting them on a pedestal” is tantamount to success.
The way to show this care, according to Rodenhiser, is to involve his employees in the business.
“I am so proud of every one of our employees just because of the way they take care of our customers,” he said. “We keep referring to good character and as long as we support our people with the best training and support, we will be successful.
“We can out-service our competition and provide a better service experience because we care.”
Caring starts at the top. Rodenhiser makes sure his employees are shown respect and rewarded for their efforts.
For Jeff Chase, the key word is “continuity.” He likes to see the same, consistent quality work from his employees on a day-in, day-out basis, whether they’re in the field or in the office. “Without that element, we would be out of business.”
Chase said he likes to see each customer treated in a consistent manner, and “If we are doing a certain building and the customer requests a foreman or a project manager they’ve worked with in the past, we will provide them with the people.”
Chase knows the pitfalls of the trade and how unattractive it may seem to outsiders, but he is able to maintain stability despite the pressures to outperform the competition.