Rousing Residential Market Share

By Jessica Kirby • Photos courtesy of SMACNA

Welsch Heating & Cooling shares best practices for gaining market share in residential and points to a strong relationship with Local 36 as a driver in their success

Welsch Heating & Cooling and Local 36 have gaining and holding residential market share dialed in. Backed by the contractor’s 130 plus years in business and a solid team of organizers and management at Local 36, the St. Louis market is rife with opportunity.

In an interview with SMACNA’s Seth Lennon about the residential market, Paul Heimann, controller at Welsch, and Scott Pires, residential technician, discuss challenges, problemsolving, and labor-management cooperation in the residential HVAC market. Chris Racherbaumer and Jake West from Local 36 share how the labor market has changed and why having a strong relationship with Welsch Heating & Cooling has facilitated growth in the market.

Roots in residential

The residential climate in St. Louis is promising with opportunities for growth, Heimann says. The company began its residential service focus in the early 70s, and Heimann attributes the company’s success to entering the sector early and staying the course.

“St. Louis has a strong presence in the residential market because we never gave it up 20, 30 years ago when everyone was chasing large commercial contracts and high-rises,” he says. “We saw the need and opportunity to continue to do housing.”

During the 70s, 80s, and 90s, there were 6,000 houses a year being built, and all of those have come back to market as replacements, closing the loop on what Heimann calls the “circle of life” in the residential market.

“We like to do track homes, new construction, and custom homes, and we like to service them for a number of years,” he says. “We do some humidifiers, air cleaners, air purification systems—whatever the homeowner needs. Fifteen years down the road we are there to change it out and do it again.

“So, I consider it a whole circle of life for us as a business, and if we continue to do the work correctly, not only do we keep those homeowners, but we also find more to do.”

Growth has also meant diversification and expansion in the service end, Pires says. He notes that moving into geothermal, for example, has created important opportunities for the company. “A lot of companies just want to do the basic equipment, but if you can expand your footprint, the world is your oyster.”

Of course, the market has had its ups and downs, and through it all, perseverance has differentiated Welsch Heating & Cooling from the non-union market. Although staying in the market was a bit of a gamble 40 years ago, it is paying dividends now.

“We find that people are willing to pay the price for the right contractor,” Heimann says. Being the “right” contractor often comes down to exceptional service—the rarity of which is a pain point among current trends of investment companies buying up residential companies and focusing more on profit than on customer needs.

“That trend has turned customer service into a number one priority here in St. Louis,” Heimann says. “We are able to provide them with a good job at the right price, and it makes everything whole.

The union difference

“We pride ourselves on being a union company,” he adds. “With us, customers are getting highly-trained, qualified individuals through Local 36, which has been very supportive of our efforts to continue to stay in that residential market.”

Establishing an adequate workforce and finding the best qualified people to send to contractors can be a challenge but working closely with JATCs and unions like Local 36, which maintains a strong pool of people to draw from whenever contractors make requests, might be the signatory industry’s best asset.

“With the growth the HVAC industry has seen, we have been hiring pretty substantial numbers, well over 100 apprentices a year for the last couple years,” West says. “Meeting those demands is challenging, but we are always trying to reach out to schools and tech programs and community colleges to find those people who want to get into the HVAC industry and want to get into the union.”

The biggest draw for residential is the opportunity or a booming sector. The pay and the benefits are also attractive when compared with the non-union shops, as well as steady, reliable work.

“You see ebbs and flows in the commercial market,” Heimann says. “You can work there for a couple of years and then get laid off and go work for another commercial contractor. Typically, in residential, when we get a worker, we don’t like to give them up. One strength of the union is that is has diversified its training program so when one person gets earmarked for the residential market, they have a training program for that sector.”

Labor-management cooperation

The role of labor-management cooperation is an important one, especially with the union sector poised to take on more market share over the coming years. Welsch and Local 36 have a long-standing positive relationship, and Pires says having levelheaded people on both sides means organizations can overcome just about anything.

“If you have something going on and you can go to your rep, and they want to sit and talk with you and you have the same goals, it is not hard to get along,” he says.

“I am a big believer that we are both in the same business,” Heimann says. “The union’s job is to sell us man hours, and our job is to sell man hours to the customer. If we are compatible in meeting that goal, there should be no issues.”

West says the key to cooperation is open communication and being able to have a conversation while remaining level-headed.

“If an issue arises, being able to work through it and refer to our CBA so we can focus on solving the issue and moving on,” he says. “That is what really projects us as being strong in the industry. If we are butting heads and not getting along that creates opportunities for our non-signatory competitors to step in.”

A future in residential

Staying competitive and growing market share will require companies and the laborforce to stay abreast of new technologies and developments in the residential market. Pires says new, higher-end systems are almost like smaller commercial VRFs, for example. “Things are definitely getting more technical and advanced,” he says.

From the labor and workforce development side, West and Racherbaumera are hard at work finding qualified people and ensuring they are trained in the very specific discipline of a heating and cooling technician.

“That’s going to be one advantage signatory contractors have over their competition,” West says. “They have access to an organization that is dedicated to finding these people, training then up, and getting them employed.

“Our goal is to keep businesses focused on business so they can continue to go out and bid without having to worry about finding manpower because that’s our responsibility,” Racherbaumer says. “They can stay focused on growth.”

Welsch is steadfast on heating and cooling, believing there are enough customers out there to do that. “We are heating and cooling specialists,” Heimann says. “That is what our people do every day. In five years, SMACNA and the union could gain some of the market share back just based on staying true to our values, educating the customer, and doing the customer service correctly.

“If we do all of that, our business will continue to grow and expand just based on the best practices of being a good, solid heating and cooling company. The sky is the limit.”

Related Reading:

The Best Practices Market Expansion Task Force along with Welsch Heating & Cooling has developed a comprehensive best practices resource on winning and retaining market share in the residential sector. Access this and other valuable resources for building your labor-management partnership at pinp.org under “Best Practices Tools”. 