‘At Your Service' in Ohio's Capital City

In Greek mythology, Atlas was the burly god who bore the world on his shoulders. His great strength was his hallmark.

A good butler is prized for his loyalty and service.

Put the two together, and you have the model for a heating and air conditioning company that has made "Strength through Service" its calling card: Atlas Butler, Columbus, OH, the Contracting Business 2007 Residential Contractor of the Year.

Atlas Butler's main territory lies in and around Central Ohio's Franklin County. In March, Atlas Butler opened an office in Cincinnati, so expect great things to happen in that market, if its Columbus success is any forecast of more good fortune.

Led by third-generation President/CEO Mark Swepston, the 85-year-old Atlas Butler is a classic HVAC survivor, one that has seen the industry evolve from coal furnaces, to forced air coal furnaces, to gas heating, to the air conditioning boom of the 1960s, to the full-service systems of today.

New Leadership, New Challenges
Despite working for the family enterprise over a succession of summers as a young man, it first appeared as if Mark was the only family member who was probably not going to enter the business. Like his father, who had earned a law degree, Mark was also drawn towards an altogether different profession.

"I was going to be a banker," Swepston says. "I went to grad school for banking, and worked in the Atlas Butler accounting department for income. However, there was never any pressure to be part of the family business."

It soon became clear, however, that Mark Swepston was destined to champion the Atlas Butler legacy, as its third generation leader.

"I had met John Pierce, a past president of ACCA, at a summer training session, and he basically talked me into staying in the industry. I went from training to be a banker, to being Atlas Butler's assistant service manager, and then service manager."

Swepston took over as president of the company in 1986.

Mark Swepston has a knack for solving problems, and soon into his presidency, a significant business challenge appeared, one that threatened the company's very existence.

Having taken the reins during a bleak time for the U.S. economy, Swepston experienced a major baptism under fire. The savings and loan debacle of the early 1980s was in full swing, and commercial construction came to a virtual standstill.

"Buildings were overvalued, and all kinds of problems developed," Swepston recalls.

"The prime interest rate had soared to about 22%, and base interest rates were out of sight."

"Of the key commercial contractors we dealt with, four of them either went out of business or stopped operating," Swepston says. "Basically, half of our livelihood disappeared, and we had to get creative almost to survive."

It was crunch time, and the Swepston team scrambled to reorganize and refocus the company business.

"We reevaluated the business, and determined what was most profitable, where the best cash flow was to be found," Swepston says. "We found it in the service and replacement business"

From that point on, the company's new game plan would be based on selling residential and commercial service agreements. Today, two-thirds of the company's service business is prepaid.

"I've taught business classes in cash flow management, and I'll tell you, until you live through those cycles, and see them, and understand them completely, it's quite a bit different than reading about it," Swepston says.

"We've learned that it's best to be in a place where you don't have to borrow any money. When we get a new service agreement customer, we want to keep them for life. It's a lot easier to get a customer to call you for a $39 or $79 service call than it is for them to buy a $6,000 or $10,000 system.

"Our strategy is to win their respect for $79, and keep their respect as their purchase decisions grow. We want them to call Atlas Butler because they know we can solve their problems."

Atlas Butler has approximately 10,000 maintenance agreements in place, and strives to increase that number by 15-20% per year.

The Atlas Butler company has shown consistent growth over the last seven years. In 2005, replacement sales jumped 30%, due to pent-up demand following a very mild summer of 2004. Residential service income for 2005 grew by 24%. Sales for 2006 were rather flat, at just more than $13 million, which Swepston says is somewhat related to its sales of high efficiency equipment long before the 13 SEER mandate.

"There is a larger gap between repair and replacement of equipment with 13 SEER units," Swepston explains. "Most people buy one piece of equipment every 15 years, and we were selling 12 SEER and higher last year. Less than 10% of our 2005 sales were under 12 SEER. But with the additional spread between what I can fix it for versus what I have to pay for a new unit, many made the decision to repair rather than replace."

 

The Name that Matters MostPrivate labeling is a key element to Atlas Butler's success, yet Swepston agrees that the private label concept doesn't have to be as complicated as some have made it out to be.

 

"During a meeting with a customer, you tend to not even bring brands into the equation, unless a customer asks for a specific brand," says Swepston.

"We're ‘brandless' in the sense that, if someone wants a particular brand, something they've been happy with for 30 years, one that's given them no trouble, we say ‘absolutely, we can take care of that for you.' We speak to them about the features and benefits of the system, and what it's going to do to solve their comfort problems, but we don't get into kicking tires."

"We don't ‘sell' equipment," says Swepston. "Sixty to 70% of our equipment leads come from the service department. We're not out there battling over equipment. We focus on customer service, on taking care of the problem.

"We're always talking about high-efficiency. We listen to the customers, ask a series of questions, find out what they want and recommend the best equipment, which is usually high efficiency."

Private labeling also lends more prominence to the Atlas Butler name.

"When your name is on it, you're the one who remains in the forefront," says Swepston, and the better dealers will welcome that scrutiny.

"When manufacturers would share their survey results as to why people buy, the first couple of things on the list were that they trust the person sitting in front of them, and they buy from the dealership name or function.

"The person sitting with the customer at the kitchen table makes or breaks the sale, not the equipment," Swepston says. "We view this as a retail service business, not as a contracting business. Yes, we're a contractor, but of our more than 100 employees, 50 of those are technicians who do nothing but solve problems for people."

IAQ Breeze Brings Fresh Air to Market
Atlas Butler is doing a full gainer in the pike position into indoor air quality (IAQ).

Its first quarter advertising was predominantly focused on IAQ products and services, and Swepston says there's no turning back from making IAQ a key service offering.

"I gave a presentation at HVAC Comfortech, in which I stated my opinion that contractors all use "heating and cooling" in their names, and have ignored air cleaning products," Swepston says.

"We're told that more people today understand IAQ, and that there's interest in it. The problem is, we have terms that confuse people. In TV commercials by Oreck or Sharper Image, they fill a box with smoke and suck it out. Our industry has to get the message out that the portable units only clean one room, and don't even do that very well. And, if you put one in every room, it'll cost 3 times as much as a central IAQ system."

Swepston believes IAQ is the industry's next frontier, an ideal opportunity for contractors who are tired of modest annual growth. The idea screams common sense.

"If you look at the other HVAC markets, all companies have experienced 3-6% growth a year, forever," Swepston explains. "Go down any street, and find those homes which were built 15 years ago, and you know where the next replacement sales will be. And what's the difference between contractors? Price.

"There's no ‘add-on' to speak of in the Columbus market anymore; it's a predominantly replacement market, and to gain market share, you have to basically take business away from someone else. And very few homes , realistically have good air purification and filtration, humidification systems that make sense. That's where the market is."

Atlas Butler rests on a solid management structure. Rich Schmelzer is general manager of the company's commercial division. Russ Puckett, vice president of sales, is also vice president and general manager of the new Cincinnati division. Bill Esch, chief operating officer, has worked in financial management positions for a major Wendy's, franchise, Cooker restaurants, and Nationwise Auto Parts.

Training Technicians at the AB Academy
Many of the best HVAC contractors in the U.S. have established in-house universities, in an effort to train and nurture the best candidates the labor pool has to offer.

In 2002, Atlas Butler opened AB Academy, as way to attract those who have never considered the HVAC industry as a career.

AB Academy is a four-year training program. The first two years are coordinated with Columbus State University, which provides trainers who visit the AB Academy site.

After one year, the students have earned one year of college credit, and by that time are working as paid helpers in the AB installation department.

Atlas Butler provides full tuition loans. If the employee stays with the training and the company for two years, Atlas Butler pays the loan for them.

Ongoing training is provided to all technicians, not just those in the AB Academy. "Our technicians receive a minimum of 40 to 80 hours of training each year. Some get up to 300 hours, and a good portion of it is paid for.

Mark Swepston is guided by fairness and generosity, and driven by a desire to continue the tradition of excellence started by his grandfather 80 years ago.

He's had a varied business life in addition to running the company, having either purchased or helped to start 20 different companies.

And, he loves to give back to his people by paying them well.

"If you create a positive atmosphere, and a good career for people to work in, most people will respond to that. And, you must pay them fairly," Swepston says.

"I'm here to help people ‘fund' their family life. It's critical that you make sure they can afford to live. We don't try to get people in here as cheaply as we can. We look to see how we can pay them as much as we can for what they do."

Careful Hiring Process Ensures Best Fits
Key elements in the Atlas Butler hiring process include personality profiles and technical aptitude tests. And, the less you know about HVAC, the better.

"We hardly ever hire someone with experience," Swepston says, the commercial division being the exception.

Atlas Butler's commitment to quality is the main reason why it prefers to hire people with absolutely no experience in HVAC. "We accept people at the ground level, so they can see how everything works, as it relates to installations," Swepston says. "As they're doing that, they're learning the service and troubleshooting side.

"We had more than 300 applications in 2005. We interviewed 100 of those, and hired less than 50."

"We use the AB Academy program to train people our way," Benua explains. "We hire based on attitude, and then develop their technical skills."

And for those contractors who have struggled to hire students out of high school, it's interesting to note that most of Atlas-Butlers new employees are people in their mid-to-late 20s, up to the 50s, people who have left other careers due to downsizing or a desire to do something different. They include a printer, truck driver, electrical engineer, and a female legal aide.

"I can go through story after story of people who have come here from different walks of life and have done well," Swepston says.

Atlas Butler relies on a three-step interviewing process, which has greatly reduced quick hires and slow fires.

"We take the test results very seriously, and we've learned to trust them," Swepston says. "We look for candidates with the initiative to learn, and who display honesty and integrity."

Listen to the Customer
High-quality service is easy for Mark Swepston to define, even if he borrows an old slogan from a corporate giant.

Whenever I think of ‘quality,' I think of the old Ford slogan, ‘Quality is Job 1.' Swepston says. "Quality is an absolute. Our employees need to spend 75% of their training in learning how to deal with other people. We have to listen more to the person, not the equipment.

"Of course, you have to do it right technically; there's no excuse not to. If you don't do your work right, it all falls apart."

For Atlas Butler to be true to its mission, "good enough" is not good enough. Swepston and Chief Operating Officer Bill Esch regularly monitor call back rates on service, installation, and paperwork. Each customer is asked to mail-in a service survey, and the results are tabulated by an independent survey group.

"If we don't have 98% customer satisfaction or higher, we look into it," Swepston says.

"And even when we see 98-99-100% approval rates in our surveys, we still think we can do it to that small, nth of a degree better."

Esch focuses on performance indicators for each key position. He ensures employees are recognized when they perform well, and informed when their performance needs to be strengthened in any area.

"Atlas Butler is very committed to training. It's not a situation where you're trying to squeeze expenses and reduce training budgets," says Esch. "Our budgets are religious, but we also believe in spending money in the right places, and not cutting training. The purpose of our AB Academy is to have our technicians be well-trained, so they can pass their NATE certification exams. We don't send anyone out to a home unless they're fully trained."

Service Kings of the Queen City
The move into the Cincinnati market was sparked into life after Swepston attended an ACCA session on retirement planning.

"I figured, since I'm turning 50, instead of planning to retire, I want to put together a 50-year work plan. We're going to keep moving ahead, to grow the company even more than today. Our goal is to become a major regional company, one that will include Cincinnati."

Russ Puckett — a Cincinnati native — moved back down to his old stomping grounds in April of 2006, to oversee the Cincinnati venture.

"We now have five technicians, an excellent office administrator with 14 years of experience," Puckett reports. I ask the guys if they want me to hire more technicians. Given that they're on performance pay, they say ‘no.'"

Puckett says he wants to grow the Cincinnati business to be even bigger than the Columbus operation. Swepston thinks it can be done.

"We understand the components involved in running a $10 to $15 million business, and we feel it can happen.

Bill Esch is in place here as our chief operating officer, and we have a team that can get it going, and make everything work together.

"Cincinnati is a diverse, mature market that's growing slowly," Puckett says. We know where the market is, and we plan to gain service customers, and keep them for life."

Hiring strategy for the Cincinnati division is a carbon-copy of the Columbus methods.

"We're hiring people who fit the Atlas Butler mold. I was at a home last week with a service technician, and the homeowner remarked that ‘you guys are all the same.'

"It's the most team-oriented group I've ever been associated with," Puckett says. "One technician will volunteer to help another finish up a job, at 10 ‘o clock at night."

Puckett served four years as a Navy communications electrician, attended college on the VA bill, and later enrolled in an HVAC program in Cincinnati. Eventually, he became an assistant manager for another company.

"I've been in HVAC all my life," Puckett says. "I've been an installer, service technician, service manager, operations manager, you name it."

Swepston has many classic service emergency stories, the most revealing of which being those which fall prior to major holidays, and/or when the weather is at its worst.

"A customer called on December 23rd," Swepston recalls. "His family was coming in from out of town the next day, to share the wedding plans they were making for he and his fiance. We installed an entire new system for him on Christmas Eve. Some time later, he recognized me at a restaurant, and thanked me in front of about 20 people. He had been referred to us by a friend of mine, whose furnace we also installed in one day.

"Another exciting installation was on July 3, for a couple who were to be married that weekend. We started at 5:00 p.m., and had the system in by 9:00, just in time for a rehearsal dinner on July 4."

Excellent service, dependability, and a constant willingness to go the extra mile are categories in which it's tough to remain consistent.

"It takes a lot of energy, and we work hard at it," Swepston says.

"Do we get caught short from time to time, when it gets hot in the summertime, and we don't have enough help? Absolutely. Everybody's going to experience that, but if you want to continue to grow, you've got to figure out a way to make it happen."

Mark Swepston and the team at Atlas Butler are examples of service in word, and in deed. They talk the talk, and walk the walk.

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