How Do HVAC Contractors (and Customers) Navigate All The Chain Companies?
It's certainly not hard to notice that these days if you call a company for HVAC, plumbing, electric, etc. more often than not if your former contractor is not around anymore, you're going to find yourself in a jungle of a diminishing number of sole proprietors vs a burgeoning crowd of statewide and national chains, each with multiple/interchangeable names and teams of receptionists. You email one company and get a reply back from another that claim to have the same owner. When I recently found some actual sole proprietors I breathed a sigh of relief as if I'd been stuck in a world of androids.
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I am familiar with this trend. Some of those Mom and Pop companies have even kept their original names and connected with the "Chain Gangs". I owned a sole proprietor (actually registered as LLC) that I ran with my son. I had several competitors that were "affiliated". They all seemed to offer you a 3 tier price Good, Better, Best, to get just about everything done from replacing a thermocouple to installing an entire system. The goal is to upsell everyone. And taken at its base philosophy it is a great business plan as long as the leadership of the company offers reasonable “GOOD” options that were actually available for the less fortunate income wise.
The problem is that when the owners join up and take the “How to run a Successful Contractor Business” meetings they see profits and become bean counters and break away from the thing their parents started 30 years ago. “Customer Service”
The bottom line is that if you find a Mom & Pop outfit, they will probably go out of business within 10 years. that is because the good technician is not always the good business man. He has the knowledge to fix your stuff but is not as good at balancing the books. With the friends that I had in the business, I was able to find some of the secrets that make the big boys profitable, and incorporate those ideas into my small business.
If nothing else, the owner will get old and not have anyone to pass the business on to. So here I am in my disabled state, sharing my experience.
Edward Young Retired
After you make that expensive repair and you still have the same problem, What will you check next?
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@EdTheHeaterMan Thanks for your very interesting cautionary tale. I know doctors have been doing this for years—perhaps more for protection from the high insurance costs. Doctors bristle at having to take orders from the bean counters when they called their own shots for years. Perhaps HVAC people are more of an independent breed—but the Wall's followers are probably not a typical cross-section. I have found that in the music business when you go to put your music online, one is hard-pressed to find a company that you can speak to on the phone; email is the only way. And that causes problems that could have been solved in one or two short calls to take more than a week as people go back and forth trying to clarify what they meant in the first place.
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it’s tough for a small shop to make it theses days. Especially if you want a decent wage, days off, medical and dental, and a retirement package. Is that too much to ask? A known exit strategy is helpful also.
That is the attraction to consolidators, or franchises.
Lawyers do it, doctors, car dealers, my dogs vet is now part of a national chain, food stores, etc, etc.
I find the chat or txt option goes through the quickest when you want to connect to most companies these days
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream
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NJ Steam Homeowner.
Free NJ and remote steam advice: https://heatinghelp.com/find-a-contractor/detail/new-jersey-steam-help/
See my sight glass boiler videos: https://bit.ly/3sZW1el1 -
@ethicalpaul Great article. If this new business model can manage to maintain a high level of technical training and the human connection it may indeed become the way to go. Other purely digital businesses where there is no required face to face public connection may face a rockier road especially with AI coming on strong. One of the shortcomings of AI has been people's sense of isolation as they interact with non-existent entities . With a little forethought perhaps that can be avoided. Part of the brilliance of all Dan's industry stories—and all our Wall posts is that they impart the sense that we are all still around a campfire trading experiences, adding to our living archive.
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By avoiding the franchise or nationally affiliated "dealer", the homeowner can save a huge margin that goes into franchise fees, marketing and other quality-cutting engineering. Some smart buyers know this and seek out the small proprietors.
Others simply overpay for service performed by franchisees receiving ten day training courses.
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On a related note (national franchise businesses with big-name/org ownership), I'm upgrading HVAC soon and trying to tighten up the house. I need 4 new windows - energy efficient and properly installed. Quote for pretty good window units: about $300 each, to self-install or find a good carpenter. Went to the hardware and there was Renew by Anderson. Can we send someone to help you? Sure, I'll give it a try. Sales guy shows up, looks at my old windows and exposed rough openings, enters stuff in his computer….. (He knows nothing about windows, really.). Cost comes out with all the sales pitch. $5000 PER WINDOW, INSTALLED! I showed him the door. Why aren't rackets like this illegal?
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How do I navigate as a customer?
I ask neighbors for references, do internet searches, look at whose trucks are in the neighborhood and get several quotes. A lot of contractors don't advertise on their trucks, they just drive generic white vehicles. My neighbor is one of them. He is never home goofing off. Always working. His adverts is word of mouth and connections in the trades.
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how do you think they pay for all the daily advertising you hear on local stations. Weekly flyers on and on.
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@slamdunk How do I navigate as a customer?
I ask neighbors for references, do internet searches, look at whose trucks are in the neighborhood and get several quotes. A lot of contractors don't advertise on their trucks, they just drive generic white vehicles. My neighbor is one of them. He is never home goofing off. Always working. His adverts is word of mouth and connections in the trades.
Therein lies the problem with many one man or small shops. No time for the family, or enjoying life, been there.
Trades people deserve to make money, lots of it in my opinion. And have a life with all the comforts.
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream
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Like it or not the current trend of trades being bought out by outside money is here to stay. Locally I have observed several of these acquisitions closely as a distributor. I pay attention to my customers google reviews and I have to say all of the recent acquisitions have seen their google review score go up. Customers want a company to call them back, send them a quote, and give them a start date, then actually show up. They want communication through the sale and install, and support after. Most of them don't really care if they were oversold on product or not. There are several jobs I would gladly pay a contractor to do but none of them ever call me back! and I am in the industry and know them all personally, now imagine you are an average end user with no contacts in the business? All of a sudden that chain company that actually calls back, emails you quotes, accepts every form of payment, has an office staff to answer the phone, communicates with you through the install process, and completes the job on schedule looks like a bargain at their 20-30% higher price.
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And I daresay it might be possible for a chain company to be able to provide that support without being 20-30% higher. They may have advantages of scale, among others.
NJ Steam Homeowner.
Free NJ and remote steam advice: https://heatinghelp.com/find-a-contractor/detail/new-jersey-steam-help/
See my sight glass boiler videos: https://bit.ly/3sZW1el0 -
Nobody is looking to buy out little guys like me. When we are gone, we are gone. The world has changed. Hedge funds and the bean counters are a menace, the real reason for high prices. I've never been able to keep records (turned down for a county license because of that) but I'm pretty darn good with a torch.
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From everything I've seen "private equity" = license to steal. Every business taken over by private equity produces higher costs to the consumer, screws over it's workers, runs the business into the ground, and makes a pile of money for a few people who already have more than they can ever spend. Just sayin'.
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Well the good news is if they really run the business into the ground then they will just disappear eh? Private equity needs to make money, ya can't do that with no employees and unhappy customers! The market and our customers dictate who succeeds in business, and not just for the trades, the private equity firms wouldn't keep buying if it weren't profitable, and it wouldn't be profitable without paying, happy customers and employees.
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This is what I have tried to figure out how to say when people complain they can't find anyone in the trades. The industry needs to figure out how to fix this and I think it is driven at the top by banks and developers and CEOs pushing unreasonable schedules for projects. When you have the choice of another job that does have vacation that you can actually use and benefits and isn't going to commit to a schedule that they don't have the resources to meet people are going to choose that.
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My experience with google reviews has been that they are useless for determining if a service or product is any good or not. The things with the highest reviews have skewed the reviews to be high and the things that i know well, the best ones have ratings somewhere in the middle.
Whenever I have had family members use one of the big conglomerate services I have had to re-do almost all their work properly.
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But if the consolidators are in fact buying up thj small companies, won't you get the same technician, just with a different shirt on?
For the most part techs tend to stay techs. And they get more training and are paid for attending training with the bigger shops. That goes into the higher selling price.
I have done training events where large shops send 10 employees for a 4 hour session.
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream0 -
My experience is very limited but it seems it is more the shops that didn't have someone that was skilled to train the techs or where there was someone very skilled that retired that get acquired, the shops that are doing good work stay independent. There is the tech that has seen everything and can do it all on their own then there is the tech that can do a good job when they have someone to describe what they are seeing to and can understand it when the person with more experience explains to them what they are seeing.
There is also the big company bullying the techs in to staying to their business model instead of taking the time and materials to do a good job too.
There is also the company managing the techs correctly, I work in AV and we see a lot of techs from contractors that are smart people that could do a good job but they are over scheduled, they aren't given the tools and materials they need, and they aren't given someone more experienced to help them learn. I actually think this has progressed to the point in AV where the people they could learn from have mostly moved to other fields or retired. The management seems to have no concept that 2 techs with different amounts of experience can do a job of equal quality but you need to give the techs with less experience more time to do it.
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I'll note that it is very different between a company growing to a large company vs a national company buying up small local companies.
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Yeah I would not suggest using google reviews for a barometer of a products quality, or the knowledge of a service team, and that isn't what I suggested. You and I value knowledge, skill and honesty in the trades, our customers value things differently even though they wouldn't say that. They just want the job done, they want a phone answered, and they want to receive communication about their project, when there is a problem they want it fixed. For all mom n pop plumbers, or "the little guys" they will absolutely need to provide the same level of "customer handholding" the big guys are offering to stay competitive, because these guys are making tons of money, they are not pulling back investments rather they are increasing investments.
I might add this whole situation really ticks me off on a personal and business level as my primary source of income relies solely on "the little guys", and these are my friends as well as customers. I just want to make perfectly clear I am not advocating FOR the increase in private equity into the trades, I'm just trying to argue that it is working, and will only become more and more prevalent unless our customers change, or the market changes.
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There is a lack of skilled workers in every trade. As well as trainers for those willing to learn.
Watching the trade media it looks like the consolidators and franchises spend a lot more time and $$ reaching out to people, young and old to consider the trades. Smaller shops put a hand written note on the stack of 100's in the wholesalers bulletin board. You need $$ to keep a stable of recruiters out spreading the word.
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream0 -
Perhaps they are getting them then either causing them to leave or getting rid of them because they don't fit what the management thinks they should be.
The techs and programmers we see from AV contractors could be successful if they were set up by the company to be successful.
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People don't quit their jobs, they quit their boss or managers.
If you are a good tech, show up clean, sober and on time, you will have little trouble finding a job.
It cost a bit to have a tech even walk in your door, a few more grand on training, I doubt many shops want turn over. Unless the second line above applies. Even then there is a job for most any one that wants one.
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream0 -
What is illegal about a $5000 window?
It is free market capitalism.
You are free to DIY or try to find a cheaper alternative.
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Well said. Trades are hard work. Takes brains and brawn. I have big respect. People who work hard deserve a work/life balance
Therein lies the problem with many one man or small shops. No time for the family, or enjoying life, been there. Trades people deserve to make money, lots of it in my opinion. And have a life with all the comforts.0 -
This is an underrated post. You're right. Big shop with deep resources and ability to get the job done on time is worth a premium. Anyone jerked around on a renovation project with a ghosting sporadic solo operator will agree. People just want the job done with minimal headaches. Maybe a bigger shop delivers that
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@hot_rod, I didnt mean to imply that he doesnt have a life…he does. He Just does not need to advertise for work. He really likes his work and does work hard- Saturdays, late nights, billing, paying bills etc. You know the saying, love what you do and you'll never work a day in yourlife.
He has four or five, long time, employees. They stay busy. I don't see him ever selling his company to an investment firm. He is the company. People go to him. Of course, every person has a price and he is my age (60) but his customer base would disappear into the ether.
My gut says he'll let his employees run the company and he takes a cut, like a pension.
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Too much money or too few investment opportunities.
Natural business model is relatively small independent service companies; technical support supplied by manufacturers' reps. Only suckers service their trucks at dealers.
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the decision to sell or not is often decided by how well he has prepared for retirement. A buy out often includes a few, maybe 5 years employment with the new owner, if they want to stay part of the day to day.
These days with people living and staying active into their eighties or nineties, that retirement nest egg needs to be considerable.I had 3 plumber/ techs working with me. We finally decided to split up the after hour and weekend calls. But also made it profitable for the on call person.
The dispatcher offered the caller same day response at the premium rate on weekends and after hours. Many chose to wait till Monday unless it was an absolute emergency.
I don’t wish the small or one man shops go away. But I do wish they are making well into the six figures and making time for friends and family.
Bob "hot rod" Rohr
trainer for Caleffi NA
Living the hydronic dream0
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