Setting High Standards
Our story starts like many stories start in this industry. After working for other local plumbing companies for a few years, two brothers, Mark and Rusty Powers, start their own service and repair business with a loan from dad. Rusty parks his car on the street and, voilI, the garage becomes the new headquarters of The Heating Co.
Of course, it's a time and materials shop because everyone knows that's the only way it's done in Juneau, Alaska. They make progress to a certain extent, even moving out of the garage a year later. Above all, the brothers set high standards for their work, go the extra mile whenever they can É and like many plumbers don't get paid accordingly.
Plumbers are always giving away their talent for bargain basement prices, says PM columnist Ellen Rohr. "There's a painful moment of epiphany for some," she explains. "You have to be willing to lose the business in order to save it."
For the Powers brothers, that moment came in 1996, sitting in one of Rohr's seminars. "It was the right message at the right time," Mark remembers. "We had the right mindset, but not the right operations."
As luck would have it, the very next issue of PM had an article about the relatively new group called Contractors 2000. Since then, that dose of Rohr, membership in C-2000 and a pinch of Frank Blau have transformed what's now known as The Plumbing & Heating Co.
The company just capped off a million-dollar expansion with a move in March 1999 to a brand-new 8,500 sq. ft. headquarters. While there are certainly bona fide business reasons for the site, Mark cares almost as much for the psychological impact as the financial.
"One of our biggest concerns was our image to our employees," Mark says. "We needed to present a professional image in order to keep our current employees and attract new quality talent."
The facility includes a training room for daily education of service techs, a plumbing showroom, an exquisitely detailed boiler room showcased behind glass and a warehouse to manage a quarter of a million dollars in inventory. A new fleet of 10 trucks, with just about every new plumbing and heating tool you can imagine, is parked out back.
Behind the scenes, the company's also invested in the latest digital estimating technology and a fully networked computer system with high-speed Internet service.
In addition to switching to flat rate for service and repair, the company has made an aggressive push into commercial construction and just begun a retail sales operation.
Since joining C-2000 in 1997, gross sales have increased 40 percent each of those years.
"We've become a professional company," Mark says. "Rusty and I have become professionals ourselves, and we're making sure that our employees act like professionals and are treated professionally, too."
Service And RepairWhile the company's new building gives the business a professional luster on the outside, discussing the changes in the service and repair operations shows how professionalism first has to start on the inside.
Revenue up around 11 percent to date in 2000 vs. the same period of time last year. The department has grown by this amount each year since 1997.
Service and repair is Rusty's domain. One of the earliest changes to the company's operations came in 1996 when service and repair went to flat rate, or as Rusty prefers to label it, "up-front pricing." Even in the old days when the business didn't have much overhead, a copy of Frank Blau's Numbers Cruncher software confirmed what the brothers thought: break-even hourly rates were more than three times what they were actually billing for labor as a time and material shop.
If there is a baptism by fire, then this is it. No other company in Juneau was doing flat rate, and no one else does today. Not only did the work carry a much higher price tag, techs had to collect on the spot.
The company did lose some customers by making the switch, but Rusty figures many of these folks were mad when they were charging $55 an hour for labor.
"You can't let those types dictate how you're going to run your business," Rusty adds. "If we did, we'd still be in my garage."
Not only did the move require the re-education of customers but also the techs. "We had to deal with the 'I'm a mechanic not a salesman' mentality," Rusty says. "Also, some of the techs just had low self-esteem and didn't think they were worth as much as the flat rate charges."
Not surprisingly, only one service tech from that original crew stuck around. (The sole tech recently moved over to the new construction side of the business.)
Rusty was making service calls himself at the time, so he heard plenty of complaints firsthand. The common refrain heard back in those first days: "What's so great about you guys?"
Education, first and foremost, is one major way the company separates itself from the rest of the competition. "Our customers are looking for skilled labor, so we have to deliver it," Rusty says.
To that end, each and every work day begins with a one-hour training session from 7:45-8:45 a.m. (The techs are on company time.) Mondays are reserved for discussing C-2000's Customer Service & Satisfaction Training material. "We concentrate on making sure our techs acquire people skills," Rusty says. "This goes beyond just being polite to the customers and treating other people's homes with respect. It's about conveying honest information so people can make their own decisions."
The subject matter for Tuesday through Friday is endless. Classes include hydronics, mechanical and electrical theory, and then more technical details on oil burners, heating controls, soldering, drain cleaning, faucets, waste piping, plumbing fixtures, hydronic systems, forced air systems, steam systems, radiant systems, chimneys, antiscald protection, fuel systems, ventilation systems and water heaters.
"Each classroom session must be tailored to the group's needs and level of experience, so we start from the bottom and work up," Rusty says. "The tech's own questions are a great source of direction."
The training also reviews various administrative matters, such as filling out invoices and following up on purchase orders.
"It's easy to assume everyone knows this stuff," Rusty adds, "but there's so much to know."
For additional hydronics education, Rusty can tap into what he gained over the two days he spent at Wirsbo's Home Comfort Team training program. Plus, he can take techs down to the mechanical room that powers the building's radiant, hydronic and snowmelt systems. There, they can run through various operations hands-on and see what first-rate craftsmanship should look like.
It's one-part training room and one-part showroom. Windows on the inside of the plumbing showroom look into the mechanical room. With large windows on the outside, the lights are kept on after hours to spotlight the work.
"It is a showroom of sorts," Rusty says. "It's our attention to detail that's on display."
Not surprisingly, Juneau is a Wet Head's paradise. The majority of new residential construction includes traditional baseboard; commercially, the company often works on century-old gravity steam systems.
The company's hydronics/radiant work also has won acclaim. In 1998, for example, the work done on the 11,000 sq. ft. Alaska Litho Building in Juneau won an RPA System Showcase Award in the commercial hydronic category. The same project also won Fuel Oil News' Golden Flame Award that same year.
While the hour of classroom training a day seems hard to beat, the company's commitment to training actually goes further than that for new personnel. Before any serious interviewing is even done, for example, the prospective tech spends a day riding along with a tech. After getting a feel for the job, then they're called in. But one way or another, the prospect receives $100 for the ride-along.
New hires actually spend their days either as an apprentice helper or in the classroom with Rusty. "When a tech is first hired, they need some field experience first, almost as much they need to sit down in our classroom. It could be a few months before they're out of the nest."
Techs start out at $15 an hour. They earn a dollar an hour increase once they begin doing service work. And when they're making service calls completely on their own, they earn another dollar an hour increase.
Considering the investment made in education, the company requires techs to sign a noncompetitive agreement.
"I'm not going to train my competition," Rusty says.
While what the techs know is paramount, Rusty also sets them apart by how they operate:
- Each tech's service van holds an identical inventory of 10,000 skus, including thousands of parts and hundreds of tools. "Our service vans are identical right down to the standardized bin system, locations of parts, quantities of each part, power tools, hand tools, signage and the technical info libraries," Rusty explains. "The only difference is the van's exterior number." Each van is tracked as a separate "warehouse" on the company's software system.
- Techs fill out check sheets while on call. Although this helps the tech with the diagnostics for the matter at hand, the sheets are also filed away and serve as a handy snapshot for equipment history.
- For an extra step in professionalism, each tech wears a standard uniform, carries a tool case instead of a beat-up box, and wears latex gloves and booties when entering someone's house or business.
- All techs are cross-trained to handle draining cleaning and perform plumbing and hydronic repairs.
- The Plumbing & Heating Co. is home of the "The No Worry Warranty." The policy covers parts and labor on repair/replacement work for one year, including after-hours and holiday work.
Commercial ConstructionCommercial construction has grown to become three-quarters of the company's business and its strongest profit center. Much of the growth came just four years ago after the company unionized.
Revenue currently up 350 percent year to date in 2000 vs. the same period in 1999. However, by year's end, the increase is expected to settle at around 100 percent.
"Our main reason for joining the union was to gain access to the union workforce network and be able to offer our employees a better benefit package," says Mark, who heads up the construction business. "Unfortunately, the sad truth of the matter is that in today's labor market, if a local plumber is looking for work, he's either dead, drunk, stupid or a well-rounded mix of all three."
Pre-union, the company spent considerable time and dollars recruiting possible employees from other Alaskan cities and as far away as Seattle.
After spending thousands on travel and lodging, many of these people opted out after agreeing to the job only to discover it rains 320 days a year, and the sun sometimes sets and doesn't rise for months and vice versa.
Meanwhile, as a union firm, the company quickly hired two foremen, three journeymen and two apprentices.
"Since then, we've had a very good relationship with the union, and we've worked together to recruit a team of foremen, journeymen and apprentices that is as good as I could have ever hoped for," Mark says. "Before we joined the union, we probably went through three times as many people when we tried recruiting on our own."
The local's business manager, a former union plumber, came up with a plan to enroll the company's entire workforce for a national initiation fee of $50 per person, which allowed the company to offer a full union health benefits package to nonfield personnel.
(Joining the union wasn't a factor in recruiting talent for service and repair. "We have to grow our own," Rusty says. "Our in-house training is time consuming. But there's no alternative." Eventually, once the company is satisfied with the caliber of the new tech's work, the techs do become union members.)
To continue growing, Mark is close to establishing a joint venture with a large mechanical firm. Currently, there's about $30 million dollars worth of mechanical work spread out over five jobs scheduled in and around Juneau.
"The only thing that limits the amount of commercial construction we can undertake is how much we can bond," Mark says.
Typically, a larger mechanical firm, which has no such financial limits, waltzes in to take the work. But while the reward is great, so is the possible risk. With a joint venture, the larger firm supplies the all-important bonding, plus the credit line and executive level management. Plumbing & Heating Co. supplies the manpower and critical onsite, day-to-day management.
As for other commercial expansion plans, the company hopes to do its own version of this dance step. It's common practice for a good-sized firm to locate field offices around Alaska since most smaller communities don't have local mechanical contractors outside of a one-man shop.
After winning a bid, firms ship out trailers with the required equipment, tools and materials, along with vehicles and labor.
"At that point, it's all about being profitable, which is tough on these 'out of town' projects," Mark explains. The company has completed work in almost every community within a 200-mile radius of Juneau. Thanks to its additional resources, Mark intends to push the radius out to 400 miles. Basically, that area covers all the state's southeastern panhandle.
Retail OperationsRetail operations have only been around since May 1999. The new division was born from the simple concept that if you've got it, flaunt it. The company's got it - inventory, that is. Keep in mind, there are only two ways in and out of Juneau - by plane or by boat. And no full line wholesaler operates a supply house in town. As a result, the Plumbing & Heating Co. has to stock $250,000 in inventory at any one time.
Revenue up 100 percent, with this same growth rate expected for the next one to two years, before tapering off.
"I'd love to liquidate everything and give my business to a local wholesaler, but there isn't one," Mark says.
With so much stock on hand anyway, why not open up a showroom for the public and other building trades?
"We're like a wholesaler with retail prices," Mark adds. Besides the profit potential, all sales are cash and carry.
The showroom sells anything from entire fixture packages to repair parts for faucets. The bath and kitchen faucets on display range in price from $50 to $600. While the company is more than happy to send a tech out to handle the installation, simply selling whatever to whomever is most important. In addition, although less visible, the company also sells MRO parts to other contractors.
That covers the three main division of the growing company. The brothers have other ideas for expansion, including developing online sales or otherwise marketing and shipping fixtures and parts to Alaska's many remote communities.
"We're already used to delivery being a pain," Mark says. "Why not use that to our advantage?"
The brothers appear to be finally getting rewarded for setting high standards. But we wondered why they had always set such high standards even when they were scrapping by on time and materials.
"We come from a family of over-achievers," Mark says. "Our dad is the kind of guy who has 53 irons in the fire at one time."
We did witness this hard-working heritage over the weekend of our coverage when we spent a very long day fishing at their dad's sport fishing lodge. Not content with running an inn that accommodates 50 anglers at a time, Dick Powers also saw fit to turn his home into a bed and breakfast - which is where we stayed the night, but only after being ordered into a kayak at 10:30 p.m. to see the sunset.
"It's a matter of pride and some built-in anal retentiveness," Mark says. "If you're going to do something, you should do it right - don't hold back."