These are trying economic times. New construction is sparse, and proactive, preventive HVAC system maintenance is not often viewed as a necessity. During this time, a plan for sustainability is a must for commercial HVAC service companies.
Over the past two years, I've watched as good, one-dimensional HVAC service companies in our local market, and nationwide, have fallen like flies. And yet, the common thread that ran through many of these companies, was that they weren't diversified in their service offerings. Or, they relied too heavily on fading construction revenues to get them through the storm.
In 2010, Lee Company will again show significant growth — a 20% growth in revenues and profits. Much of that growth is due to our sustainability initiatives: offering our customers opportunities to take advantage of single-sourcing for various services. This has given us significant revenue increases, and substantial volume discounts for our customers.
What Does 'Sustainability' Mean?
"Sustainability" has become a popular industry buzzword, as it relates to energy efficiency. But what does it mean to be truly sustainable in a business operations sense?
It means having a "weather-proof" HVAC service company that's no longer so dependent on the weather — "flat lining" the peaks and valleys that come with the cold winter months, the mild spring, the hot summer and the mild fall.
It means having a "recession-proof"service company, that manages to thrive when corporations' capital is frozen or operating budgets are slashed.
It means becoming a "category of one," diversifying and separating yourself from the competition, by offering a wider variety of services than they do.
"Diversity" is another of those popular words. Where the customer is concerned, it means being known as more than just a "heating and cooling service company." It may mean you unspecialize yourself. It means getting creative, increasing your core competencies (in most cases without adding much additional overhead), and performing some of the services you used to sub out. You become a more rounded one-stop-shop, and give customers the convenience of bundled services, and additional value and savings through volume discounts.
When you expand your service offerings and give customers the opportunity to contract more outsourced services through one company, you can increase the size of your contracts and offer volume discounts. The customer pays less for their outsourced services, is often able to reduce personnel, and gets the benefits of "one call/one invoice/one throat to choke".
Changes at Lee Co.
Lee Company's path to sustainability was not typical. It was founded by Leon Lee in 1944 as a one man, post-war refrigeration service company. However, Lee soon realized that the installation of new equipment was the place to be. In 1962, Lee Company added its own fabrication shop. Plumbing and piping was added in 1972. In 1978, we began specializing in Design/Build. In 1982, we dropped the word "refrigeration," from our name. In 1984, Lee Company was named the Contracting Business Commercial HVAC Contractor of The Year.
The next 20 years saw an improved focus on the construction industry, but little investment into the service side of our company. As the signs of an economic downturn began to surface, we focused more on higher margin/lower risk service work. We built a sustainable business plan to grow the service side of our organization with affordable facility service solutions.
Break Down the Barriers
To create a sustainable but also growing service group, employee mindsets had to be changed. Internal and invisible barriers that separated our construction and service personnel were knocked down and integration began. Service offerings that made sense were added, such as:
- water treatment services;
- commercial and industrial duct cleaning services;
- industrial electrical services;
- general maintenance services;
- industrial plumbing/jetting services;
- technical services (controls, monitoring, and security);
- a Facility Management group formed.
Overhead to add these services was kept to a minimum. We transferred construction personnel to our service group, and established strong partnerships with companies that provide non-core services to our Facility Management group, such as janitorial services, lawn care services, roofing and more.
A 'Facility Solutions' Company, With More
The growth of our service group came through word-of-mouth advertising, educating our employees of our services, developing new and effective "elevator speech" — being able to explain what we do in the time it takes to ride in an elevator — and working hard to protect our first impression as a complete facility solutions company.
Lee Company has focused on organic growth by going after the low hanging fruit. We’ve informed the general contractors who have relied on us for HVAC and plumbing only, and have educated our existing contract customer base and our loyal service customers.
New Approach Opens New Doors
With our market business development approach, we've been able to bundle and customize all of our services specifically to the healthcare, industrial, government and commercial markets.
We've taken on the "everyone sells" mindset to create diversity within our sales group. Our sales training explains and incentivizes our sales people to sell all of our services on every call. Technician training provides goals and incentives instead of the typical spiff.
Creating a sustainable, growing and profitable service organization starts with just a little creativity. It includes an understanding of customers' needs knowing the services that they outsource, and building a service plan that allows them to bundle those services and single source them to one company and at a discounted price. In my opinion, it’s the perfect win/win situation.
You Can Start Today
Determine which services it makes sense to add to your organization. What outsourced services make sense for your customer to bundle? Redefine your service group and begin capturing more market share, higher revenues, and improved profit margins. And, most importantly, you’ll be taking major steps to the survival of your business.
Steve Scott is senior manger and director of facility services for Lee Co., Franklin, TN. Lee Company is a winner in the Contracting Business Design/Build competition. This article is based on "Single Sourcing & Bundled Services," which Scott presented during the HVACR WEEK Commercial HVACR Symposium in Baltimore, MD in September. Watch for additional HVACR WEEK articles in future editions of Contracting Business.