HVAC Design Build Alliance

I started Wiegmann on January 1^st of 1995 with three others in the industry. I had been part owner of another mechanical contractor for 11 years previous to that and when my partner backed out of our agreement, that led to the start of Wiegmann. Prior to that I was a sales engineer 9 years for Trane which included 6 months graduate training, so 49 years of experience… and still learning.

Wiegmann started off strong in ‘95 and grew in volume and capacity almost every year. Making a little money every year, I was happy and thought the sky was the future. Along came an individual from a competitor that said we were really missing the best market – that we needed to get into process piping, turn around work and working for industrials. I had a HVAC background and was more engineering focused than production focused, but we hired him to explore these areas. Things were going ok as there was some margin every year from process piping. However, over time, he became more aggressive and bid some large wastewater treatment plants and we soon found he was out of his league (and so were we). We discovered he had been hiding losses on one job and pushing cost to the next job, as well as installing the wrong pipe which had to be dug up and replaced and we uncovered a depth of losses that put us way under water. In 2004, our 10th year in business, we lost $2.4 million and were on the verge of running out of capital. After the yearend review, the bank sent a business savvy accountant that did mainly contractor’s books and he really put our business under the microscope. Thankfully, he recommended the bank stay with us and not pull our $2.5 million line of credit (which was completely tapped out every month and we were dodging our vendors). He asked me to go out to his country club and talk things over for an afternoon.

“Why are you doing work in areas where you have no unfair advantage?  You have customers that like you, give you repeat work, and you make good margin doing that work. Why are you doing all this other stuff – hard bid work, plan and spec work and work for generals you have no relationship with?” I responded with the usual — we were going to get better, we would get better crews, put more checks and balances in place and would hope this would never happen again. He went on to say “You need to refocus your business. Drywall contactors, concrete contractors and almost all subs do not have a product that is this important to an owner, not just at turnover but forever. Why don’t you shrink and cut your overhead a few percentage? He went on to explain that every contractor he worked with that was really thriving had some real advantage over their competitors and focused on projects where they had that advantage.

A light bulb clicked on — why not? Our executive group got together and did a SWOT analyses. We cut overhead by just a small amount and concentrated on the good work. When we cut out the cheap work, we had more time to concentrate, more time to sell, time to try new things, call on new owners etc. After 2004, we made money every year and started to climb out of the hole, but it was not until 2007 that we started hitting home runs. That year we made better than a 15% net margin on volume over $30 million and have never looked back. Over the years, we have learned a lot of techniques to make systems better, at less cost, and how to sell them. We do niche work nationwide – surgery centers, can plants, high rise apartments, office spaces with very efficient duct systems, refrigeration and sell institutional quality cooling for prices we can justify versus package rooftops. We make great margins on that work and it is easy. We continued to increase our VE and design build work and we are never worried about how this year or next will turn out. We have made more than our 2004 losses most years and sometimes multiples of that. We only execute a small fraction of the work out in the market. We feel there are many other even greater opportunities coming. We are willing to share our best practices and we are certain many of you have or will have things to contribute.

After that disastrous year in 2004, I called 3 general contractors/ friends and asked for their help while we were getting back on track. All three wanted to meet with me and each one said they had a similar experience. They all said that having a bad year might be the best thing that ever happened to Wiegmann, and at the time I wondered how that could be. Well, in retrospect, I think it was.

If you are hoping next year will be different and are not refocusing your business, I wonder why not. You can’t change overnight, but if there is an opportunity to learn from others and earn high margin work every year, why not?

This is the reason we are facilitating, mentoring, and participating in this group. Our company has some expertise to share and we think a few of you do also. Maybe together we can copy methods currently being used and perhaps uncover many more unique markets and customers. The goal of the Design Build Alliance is to help us get more of the high margin/ reoccurring revenue work we all want.