One Hour Heating & Air Conditioning of Las Vegas celebrate the company's inclusion in The NEWS' Residential All-Stars, 2006.

Even though most contractors would salivate at bringing in $24.5 million in total revenue for one year, Tessler was not necessarily overjoyed with that final figure for 2005 - especially when the Phoenix-based company accounted for $25 million in 2004.

"Due mostly to unfavorable weather conditions in 2005, American Home Maintenance actually produced slightly less revenue," he confessed, almost embarrassed to reveal his company's financial facts and figures for 2005.

Well, The NEWS was not embarrassed to place American Home Maintenance atop its 2006 Residential All-Star Replacement/Add-On team for the third consecutive year. American Home Maintenance's total replacement/add-on revenue for 2005 was nearly $5 million more than second-place finisher Morris-Jenkins Co. The Charlotte, N.C.-based firm brought in just over $15.5 million in the replacement/add-on column, edging out third-place finisher Dial One Hour Heating and Air Conditioning, based in Indianapolis.

In truth, Dial One had a much better year overall than Morris-Jenkins, as its total income was $27.8 million in 2005. However, breaking that number down, Dial One accounted for just-under $15.5 million in residential replacement/add-on revenue last year.

United Air Temp Inc., based in Lorton, Va., was right behind Dial One with $15.3 million in residential replacement/add-on revenue for 2005. Rounding out The NEWS' top 5 was Cropp-Metcalfe Air Conditioning & Heating, which calls Northern Virginia, Maryland, and Washington, D.C., its home territory.

(For The NEWS' complete 2006 Residential All-Star Replacement/Add-On team listing, click on the PDF link at the bottom of this story.)

GROWING AND GROWING

"2005 was a transition year for American Home Maintenance, as we are working on two new platforms planned to be launched late this year and in early 2007," Tessler explained. "The American Home Maintenance goal is to become a national lead generation resource for one exclusive residential HVAC dealer in each of the nation's top 100 cities. The program will launch in late 2006, beginning with the Sun Belt states.

"Our second program is a tool our network partners can use to maximize communication with their customer, improve customer and employee longevity, and help seize a market's database potential. The details and technology is currently being kept under wraps for now."

In Tessler's estimation, training techs to become better teachers or educators remains the key to American Home Maintenance's success in the residential replacement/add-on market.

"Economics, comfort, or air quality, investing a little more for a higher-end system is the smartest decision a homeowner could make," he said. "Unfortunately, our industry falls behind other industries in our effort to educate our consumers about the wonderful benefits our products provide."

He added, "The hardest part of running the business is remaining a step ahead of the competition. The competition always catches up, so you have to continually challenge yourself by asking: ‘How can we do it even better?' "

Though last year was somewhat lukewarm for Tessler's blood, he sees better results for this year. "We have already seen a dramatic increase in 2006 replacement systems and revenue," he said with a smile. "This shift was caused by the 13 SEER mandate, utility rate hikes, fuel increases, metal costs, and the housing boom's creation of equity-rich homeowners.

"I expect the 2006 trend to continue and hope that our industry leaders are able to sway utility companies and politicians to step up their efforts to help our industry increase education and rebates on higher SEER system replacements."

Unlike Tessler, Morris-Jenkins owner Dewey Jenkins was most pleased with 2005's financial outcome, as the 48-year-old Charlotte, N.C. firm is all about residential replacement/add-on.

"Our revenues increased from $12.5 million to $15.597 million," Jenkins was happy to report. "Part of my philosophy is a belief in growth. To me, the business is not a fun place to work unless there's growth. Growth provides opportunity." (For more regarding Morris-Jenkins, see the related story in this issue "In a Word: Service."

(L-R) Christina McConn, assistant payroll administrator, Nicky Kelly, data entry specialist, and Gabe Ivanescu, president of United Air Temp, get ready for another day in Lorton, Va.

"The growth we experienced in 2005 was in line with expectations," said Ivanescu. "We have recorded an average growth of 12 percent per year for the last five years. Our business model is more aligned with that of a retailer rather than a contracting business. We believe that in order to be able to properly focus on your customer needs, you must have a presence in their neighborhood."

Ivanescu also believes that once a location reaches a certain size, one needs to open a secondary location to, as he put it, "serve some of the existing base." United Air Temp is currently operating from 21 different locations.

"Each location focuses on the development of new customers, as well as delivering a high level of service to the existing base," said Ivanescu. "We also have to give credit to being present in two strong markets [Washington, D.C., and Atlanta], and benefiting from a good, economic climate."

Like Tessler, Ivanescu sees a bright 2006 unfolding. "The residential replacement market will be here for the foreseeable future," he predicted. "Unless manufacturers are going to come up with systems that will require no skilled labor for installation and maintenance, somebody is going to have to physically interact with the customer.

Given our appetite for larger, more sophisticated homes, I think that any such systems are way out into the future."

In the case of Cropp-Metcalfe Air Conditioning and Heating, owner/president Mitchell Cropp was glad to report a replacement/add-on revenue boost in 2005, jumping from $11.6 million in 2004 to just-over $12.3 million last year.

The Cropp-Metcalfe advisory board has been meeting for more than 10 years discussing and discovering ways to improve the company. Sitting at the head of the table is president Mitchell Cropp.

FUTURE LOOKS BRIGHT

Like most contractors on the All-Star squad, Isaac Heating & Air Conditioning experienced strong growth, bringing in over $18 million in revenue for 2005, topping 2004's total of nearly $16 million. Joe Kruger, vice president of residential sales and installation for Isaac Heating and Air Conditioning, credits three words: focus, energy, and expertise.

"We have set goals and put together a management team that can accomplish those goals," said Kruger. "Our management team has been in place for the last 10 years, and that has been our greatest growth period.

"We have stayed on a steady course towards success led by [owner/president] Ray Isaac and have never looked back."

Regarding the future of replacement/add-on, Kruger admitted business, in general, is "not easy."

"Residential HVAC is very competitive, unforgiving, and is changing rapidly," he stressed. "To be successful in this field, you have to embrace change, be an active part of the changes, and be able to look down the road and see yourself fitting into the new environment and being a leader.

"You also need to be creative, staying 10 steps beyond your competition, plus offering a level of service and products that clearly differentiates you in the marketplace."

He remains optimistic in regard to future growth. "We believe the future will continue to be bountiful, and we plan on being an even larger part of it," Kruger concluded.

At Brothers Air & Heat, owner/president Roger Costner is expecting big things in the future, too. His team accounted for rounding up over $8 million in total revenue for 2005, topping 2004's $7.5 million income total.

"The replacement/add-on mar-ket is what we do," said Costner. "We find it to be an easy market to work in. The key is understanding that you must market to the consumer and must plan for the slow times of the year.

"We continue to push our techs to sell service agreements and last year started a Christmas bonus program where, in December, each tech will get $5 for each active agreement he has sold. This is a program where, say in a five-year time frame, a tech has 1,000 agreements he has sold that have been renewed, his check would be $5,000 that December. Last December, in our first year, the largest check was $850."

In the end, it's all about differentiation, he said. "We will continue to make ourselves different in the marketplace with aggressive marketing and letting the consumer know that at Brothers you get service you can trust from NATE-certified technicians who show up in well-stocked trucks and fix most units on the first visit."

Sidebar: Team Has One-Hour Flavor

In addition to third-place finisher Dial One Hour Heating and Air Conditioning (Indianapolis, Ind.), there's seventh-place finisher One Hour (Riverside, Calif.), and eighth-place finisher One Hour (Las Vegas).

It does not stop there, either. There's 18th-place Mr. Furnace's One Hour Heating and Air Conditioning (Fonthill, Ontario), 20st-place Boonstra's One Hour Heating and Air Conditioning (Hamilton, Ontario), and the last contractor on the list at No. 22: Furnasman's One Hour Heating and Air Conditioning (Winnipeg, Manitoba).

Because the last three are under the AirTime Canada ULC umbrella, president and COO Bruce Cook had plenty to say about each business, zeroing in on Mr. Furnace's One Hour first. The franchise earned $5.6 million overall in 2005 - with the same revenue amount in the replacement/add-on market.

"Mr. Furnace's One Hour Heating and Air Conditioning's brand image has grown, becoming a preferred provider, as well as the place to be for employees interested in a challenging career in the service business," offered Cook. "Can't-lose customer service offerings include a focus on indoor air quality offerings.

"With customers spending more time in their homes, the quality of the air we breathe becomes even more important. Living in our air quality-challenged environment means we are needed now more than ever to ensure the health, comfort, and safety of the clients we serve."

Boonstra's, on the other hand, has been in the contracting business for 44 years, servicing the Hamilton and Halton regions, 30 miles west of Toronto, Ontario. Previous owner Clarence Boonstra started the business then sold it to Union Energy Inc. in 1998. It was subsequently purchased by AirTime Canada in May of 2003.

"During the last three years, Boonstra's has focused primarily on the residential replacement market, moving to having less than 5 percent of the revenues coming from specialty new home construction HVAC services," he said, noting that the firm does not dabble in the commercial sector at all.

For the record, Boonstra's earned nearly $7 million overall in 2005, equating to just-over $5.5 million in replacement/add-on. "The key to our more than 50 percent growth in the last three years is our 40 employees' commitment to deliver on our ‘can't lose' customer service promise," explained Cook. "As the market becomes more challenging from a competitive perspective, we believe residential replacement is the place to be in our industry.

"With the One Hour methodologies and brand, people want ‘on time and can't lose' HVAC providers and that's what One Hour is all about."

Last but not least, Furnasman's has been servicing the Winnipeg, Manitoba, market for more than 63 years. It collected just over $5 million in replacement/add-on revenue for 2005 - and, praise from its leader.

"Furnasman went through significant refocusing to its current status as Winnipeg's largest, pure-play residential replacement contractor," said Cook. "Furnasman's growth during the last three years has occurred while divesting of its new home construction business."

Publication date: 09/11/2006

Links

• 2006 Residential All-Star Replacement/Add-On chart