Wheeler On HVACR: Autopsy Of A Failed Supply-House Chain
I just finished reading Ashley Anderson's excellent and well-researched article about the demise of a huge HVACR supply house chain (“The Rise and Fall of Pameco,” September 2004 SUPPLY HOUSE TIMES, page 38) and much of this story sounded very familiar - too much investment money, buyouts of other companies, rapid growth with too little interest and infrastructure, disloyalty to suppliers, lack of proper stock, and then the demise.
I was also told some information about the roots to this colossal failure. A very good HVACR salesman I know told me that he had interviewed for a sales job with them a year before they went under. He said, “It was a short-time job. They offered a good commission for all first-time sales, but almost nothing (2%) for repeat sales, and there are only so many potential new customers in a market, so I turned them down.”
What does a story like that tell me? That there was very little loyalty to, or interest in, the company's employees. And think about the type of sales that such a shortsighted plan would produce.
Another story that I heard from an employee at a competing company was that their main areas of growth came from selling supplies and equipment direct to home builders, and to part-time or jack-leg HVACR servicers with questionable credentials (those to whom no one else would sell). So, there seemed to be little loyalty to their primary customer base - established HVACR contractors - either. And by the way, much of this same business was purchased by those who bought out that company's assets and stores.
We all know that there are failures in the HVACR contracting business, and money can be lost. However, I don't believe that we see the number or size of failures that seem to be common among homebuilders. And who wants to risk selling to the unlicensed and underfinanced? Besides, such disloyal sales practices don't go unnoticed by better customers, and this drives them (the primary customer base) away.
Now, I don't really know if any of the things that I was told were true, but that company did fail. And I also know that the only function of management in a supply house is:
- to work closely with vendors;
- to keep and retain the best and most positive employees;
- to make sure that stores are fully stocked with the most common products;
- to have the best sales incentives;
- to make sure that they have a good pricing structure;
- to make sure that each branch has the proper working equipment (trucks, fork lifts, computers, etc.);
- and to promote customer loyalty.
This isn't brain surgery!
Unfortunately, however, these basics are often overlooked by the brass in top management in their attempts to grow companies that are already reliable cash cows. And the feeling among the young cigar-smoking “Turks,” who have just graduated from prestigious business schools and have been recruited by top management, is that their people are expendable and all that matters and that keeps the company going is them and their brief successes.
Many years ago, I worked for one company where the company president spoke to all the employees (magazine editors, writers, and artists) and told them that he could go right down to the street that day and hire people to replace them all, if he wished. Let me ask, what is a company if not for its employees?
Management isn't the company. The people who work the HVACR counters, stock the warehouses, make calls in the field, drive the trucks, order the parts and do the billing are the company to your customers. The customers don't know who you are, nor do they care; they recognize and buy from these front line employees. And management's sole job is keeping theses employees happy and motivated.
Also, who is your company without its suppliers? People buy from your stores because they are looking for certain brands and competitive pricing, and they expect the parts and equipment to be available and in stock when they need it. Remember that whenever customers leave without something they came to buy, you have actually sent them to a competitor to find it. So, treat your suppliers well, for they can't be replaced by the next company that comes down the street.
You've probably heard it said before, that customers are your company's ONLY BUSINESS. Having the best company policies, making sure that your employees say the proper words and that they have the most positive attitude, ensuring the quality and availability of stock, and having the best and most attractive locations are your only jobs. You have to focus on your primary customer base. So, don't do anything (like selling to homebuilders and part-timers) to drive them away. It's only when the people in top management forget all these things and start thinking that they are geniuses who will make the company grow by expansion that their companies fail.
Remember, failure never starts at the bottom. It always starts at the top. <<