REMAINING A SMALL HVAC SHOP IN A LARGE MARKET

BY MARTIN HOOVER

Over the years I have seen many companies come and go. Some folded because they never put in the effort that it takes to get a business off the ground. Others worked very hard but didn’t have the discipline to make the tough choices required to survive as a small startup. Still, others grew their companies fast, expanding regionally, only to see it all fall apart as fast as it grew.

From the very beginning, I didn’t want to be a big shop as far as revenue goes. I was more concerned with delivering the best service and developing a strong team. I had the privilege of working for both a great company and a not-so-great company early in my career. Also, I gained the unique perspective of having worked both for companies that treated their people well and for some that didn’t view that as a priority.

A Grassroots Effort Leads to A Strong Following

Like so many others, my wife and I started our company with barely any resources. As small as we were, we believed that we could still treat people well and stay local. We also believed that with enough hard work, business would find a path to our door. It took a bit more effort than originally expected, but we put in the time. We spent many evenings and weekends working the phones and walking neighborhoods canvassing with door hangers along with many other low-cost grassroots marketing ideas to get a small following. Perhaps without realizing it, we were creating a tight little market that has served us well to this day. After a while, we grew our business to a point where we were comfortable and could provide a good living for ourselves and our little team. We continued to market in our small area within a large HVAC market and have been able to grow steadily albeit modestly within that area. Along the way, we have developed a solid reputation and referral network that has proven to be reliable in good and difficult times.

10 Reasons Why Staying Small Leads to Big Success

Why am I letting you know about my humble beginnings? Many start-ups focus on expansion rather than building a solid foundation locally. I think that strategy isn’t always the smartest course of action. There are many advantages to remaining a small shop and keeping the service area tight. Incidentally, I am not knocking the big guys or the idea of expansion as a long-term goal, just pointing out why being local can work well for some business owners. Below are 10 examples of just a few advantages to staying small.

1. Windshield time is lower than most companies that service a larger area Our technicians can accrue more billable hours simply by not having to drive all over town. That opportunity is compounded when you have a warranty or return to complete calls. The cost of a warranty call is much less if you don’t have to add an extra hour of drive time and faster to complete calls where parts needed to be acquired to complete a repair. Even something as simple as returning to the shop to pick up materials is less when your jobs aren’t scattered all over town.

2. Establish Your Business as the Local Favorite. Establishing yourself as the local favorite and bolstering that with your presence, has a lot of advantages. I’m sure this strategy can work for a larger market as well, but it seems easier in a smaller territory. Homeowners see each other at the PTA, church, and community events. They talk and many times, ask for referrals. I do realize how valuable digital reviews are but there is something special about good oldfashioned word-of-mouth. Having a constant presence – our trucks are seen around the neighborhood or in the neighbor’s driveway or a resident might see a sticker on their unit – and high visibility, doesn’t hurt either.

3. For the most part, a small established company doesn’t need financing. This is an advantage because you are not giving away a portion of your profit off the top, to the bank. You may need some financing for vehicles and substantial assets in the beginning. However, if you live within your means, in a relatively short amount of time, you can pay for your vehicles as you go. I do realize one of the universal truths is “don’t spend current cash on longterm assets,” but vehicles are not that long-term. And the fact is you will be hard-pressed to earn interest equal to the interest you pay for financing.

4. Marketing is easier in a small market, even if it’s a small territory within a large market. These days you can dial in on a specific geographic area for digital marketing with search, Nextdoor, streaming radio, cable TV, YouTube, Patch, a local publication, or whatever your media of choice is. Compound this with your trucks constantly being seen, your guys eating at local restaurants, or getting gas at the local station, and results will follow.

5. Profitability is easier for smaller companies. I know you have heard there are “economies of scale”, and the big companies, get the best price, but the bottom line is there are principals, investors, and possibly shareholders in the large companies who have very definite ideas on how much they should receive from their investments. If they don’t get what they think is their due heads will roll so no matter how much they save on costs the burden of maintaining that cash outlay is bigger. Which rolls right into the next issue.

6. Small companies often have an advantage in the labor market. Sure, some guys want to work for the big company but I can assure you there are plenty that want nothing to do with that game. The multiple managers and monthly and quarterly forecasts that must be fulfilled at all costs, for many, are a turn-off. The constant push for profits and moment-by-moment sales quotas is not what is going to drive a great technician to feel accomplished and satisfied. Don’t mistake what I am saying – you must track productivity, keep up with your KPIs and run an efficient shop, but a technician who prefers a small operation, wants to know that sales quotas and high-end forecasting are not the be-all-end-all of their value with a company. Being appreciated for skill and character as well as being personally acknowledged for your contribution goes a long way.

7. Another advantage of the labor market is a small company’s ability to offer some great benefits. Using a Professional Employment Organization (PEO) is an easy way to do that if you have five or more employees. Sometimes a contribution to health insurance or some extra PTO or just some consideration in scheduling to allow for family time can make all the difference.

8. Small companies can be more flexible. This means management is apt to be open to change or adding additional services without having to jump through hoops or go through lots of red tape. Want to get into duct cleaning or heat pump water heaters or add attic tents to your offering? It is pretty simple for a small shop to experiment with these things. In the mortgage crisis, we saw our service revenues dramatically increase and our new equipment sales drop. At the end of it all, we kept our revenues right on target with little adjustments here and there. Profits were great. Some in the new construction side folded quickly or had to recover from huge losses as builders went bust because they couldn’t pivot easily.

9. Small companies can deliver more personable customer service. A simple note of appreciation from the owner to key customers or the owner dropping by a work site can make a huge impression and it’s something the larger companies just can’t do. The momand-pop, old-fashioned, personal touch, often goes a long way these days.

10. Small companies can make decisions immediately. Typically, there is no bureaucracy. In most cases, technicians and managers are empowered to make decisions without consulting management as there is usually only one level of management, and most situations have already been seen and handled before.

So, if you want to go big then by all means do it. However, if you choose to remain small don’t feel like you are at a disadvantage. Recognize the unique opportunity you have to offer your customers and your team members personalized, local service. It’s not about how much revenue you generate. It’s about delivering the best service that allows you to keep the most money and offers the most fulfillment and satisfaction while on the journey of building your own strong and profitable company. u

Martin Hoover is the Co-Owner of Empire Heating & Air Conditioning, an Atlanta-area business that he co-founded in 1985. The company specializes in heating and cooling sales, service, design, and installation for residential and light commercial applications. Martin has served in several industry leadership positions at the local and state levels in Georgia. He was the president of both the Metropolitan Atlanta Air Conditioning Contractors Association and the Conditioned Air Association of Georgia. He is currently serving on the Board of Directors for the Air Conditioning Contractors of America (ACCA) and currently serves on the Executive Committee. Learn more at www.empirehvac.com