What to do with the business – Part III

Reflections on the HVAC industry

I never had any intention of getting into the HVAC industry. In fact, I wrote an essay for the final exam in the introductory course in thermodynamics in engineering school on why the professor should pass me. I pointed out that I was never going to be in the business and he certainly wouldn’t want me back in his class the following year. He reluctantly agreed and passed me.

In a twist of fate, I spent my entire working career, all 48 years of it, in the HVAC business. While 48 years may seem like a long time, it passes by in the blink of an eye. I am proud to say that I spent my career in HVAC. It provided a great living for me and my family and I would do it all over again.

The next stage in my life has already begun with an appointment to the board of governors of George Brown College. I have always had an interest in education. I feel this is one way I can help shape the future of education for the next generation of HVAC professionals.

 

New contractor business models

We have repeatedly seen that industries who fail to change have been completely disrupted and marginalized by newer players. I have seen fax machines come and go. I don’t have a home phone anymore. There is more computing power in the watch on my wrist than I had access to 30 years ago. Ten years ago, companies such as Nest (Google) and ecobee came along and revolutionized the thermostat business.

What is driving the technology boom and challenges in our industry? Net-zero buildings are coming. Decarbonization is happening. Disruption is coming. New contractor business models will be required to deliver to customers what they need, when they need it.

Other industries have raised expectations with respect to speed of fulfillment. Amazon can deliver almost anything within a day and customers are dumbfounded when they are told it will take 10 days to get a part for their furnace or air conditioner. We have to find a solution or someone outside the industry will figure it out and claim the business for themselves.

Integration of services will happen. Windows and insulation will marry with HVAC. Building envelope and duct sealing technologies will have to be merged. What happens when customers don’t need a furnace any more to heat their homes? All of these factors are leading to a sea change in the skill sets required to be successful HVAC contractors.

Change is very hard for contractors to deal with. HVAC is an applied science and not an appliance to be plugged in. We as contractors bear the brunt of a user’s displeasure if the solution we provided does not meet or exceed their expectations. As a result, we are often reluctant to embrace change as it can be painful and costly.

Very few HVAC businesses want to be leading edge. The products are there, but contractors struggle to put them out there, myself included. If there is a financial incentive for the end user, and better yet the contractor, then products get adopted. When the incentives end, contractors usually revert back to the minimum code requirements.

Complicating the issue is the belief on the part of many contractors that the only thing customers care about is cheap prices − the reality is far from it. I built a successful business by offering a premium customer experience for a premium price. You can too.

 

Be careful what you ask for

Utilities used to have a dominant position in the industry because of their monopoly gas supply franchise. Deregulation changed all that. They are now required to compete with contractors on an even footing. When we were working to level the playing field with the gas utilities at the Ontario Energy Board, John Blair, the late owner of Bridlewood Heating, said that we always have to be careful what we ask for. Taking the gas utilities out of the contracting business caused spinoff businesses to develop that have become formidable competitors in our marketplace.

 

A baker’s dozen of lessons learned

  1. Price, not volume, matters. Manufacturers often advise contractors to reduce prices to sell more work to make more money. This is their formula for success because they have fixed costs. If a contractor cuts prices by 10 per cent, your business volume needs to double to make the same amount of money. This is the first lesson I learned in this business and it is still rule #1.
  2. You can’t do it alone. You need partners. The world is far too complex. You can’t possibly stay on top of everything. I have had business partners, supplier partners and industry partners. Treat them like real partners and you will grow together.
  3. Culture trumps strategy. Choose it well and feed it. It became so important in our company that we produced a “culture book” to proudly display it.
  4. Hire staff for who they are and then train them to do what you need them to do.
  5. Get engaged in the industry. This is where you will develop many of the relationships you will need over the course of time in your business. It will pay big dividends.
  6. Learn to say “No!” Focus on what you do well. You can’t be everything to everybody.
  7. Mentor someone. They will never forget you. It is a great legacy.
  8. Build a business that can function without you. You will really appreciate this when it comes time to take a vacation.
  9.  Commit to continuous education. Read and stay on top of what is happening in the industry. Don’t be surprised when change happens.
  10. Learn to be a good communicator with customers, staff and suppliers. Don’t be a black hole. People hate being ignored.
  11. Be enthusiastic. People like doing business with people who really enjoy what they do.
  12. Visit other contractors. To paraphrase American business tycoon Jack Welch: There are a lot of smart people out there. If you are the smartest person in the room, you are in the wrong room.
  13. Talk to kids every opportunity you get and encourage them to get into the trades. This is our collective future.

 

Roger Grochmal recently retired from his position as CEO of AtlasCare in Oakville, ON. Email Mechanical Business Magazine’s editor, Kerry Turner, [email protected] with questions about your company, business practices, or the industry in general.

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