Watsco: A Customer for 40 Years | In Practise

Watsco: A Customer for 40 Years

Owner and CEO at Florida Heat & Air, Inc

Learning outcomes

  • New construction contractor relationship with Carrier
  • Price competition between HVAC contractors for maintenance contracts
  • Why contractors choose Watsco for equipment and materials
  • How the HVAC procurement process has digitized
  • Watsco’s scale advantages and how they share efficiencies with customers
  • How Watsco serve customers through new innovative products such as SBE and OnCall Air
  • The power of relationships for contractors
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Executive Bio

Christopher Graff

Owner and CEO at Florida Heat & Air, Inc

Chris is a third-generation owner of a HVAC contractor based in Florida. Florida Heat & Air was founded in 1989 by Chris’s grandfather who built the business into one of the largest HVAC new construction contractors in Florida and one of the largest customers of Watsco in the area. The business is a verified Carrier dealership and has been a customer of Baker Distribution, a Watsco subsidiary, for over 40 years. Read more

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Chris, can you provide some context to your business?

It is a family business that my grandfather started, in 1989. My grandfather had been in the air-conditioning business for many years; it was probably the mid-60s when he got into it. Then he built the company and my uncle and mother took over. Through the downturn that we had in 2007, 2008, 2009, we survived and once we had decided we had survived through it, I ended up buying my mum’s half of the company, so I own 50%. I was working in the field all those years as an installer and service technician. In 2006 to 2009, I pretty much did everything, just trying to survive. There were a lot of things I did to try and help the company get through those times. We did and we made it. Now we’re thriving and everything has been pretty good, lately. I would say we’ve had a good five or six years that have been very strong.

What is your revenue split between new build and replacement?

Right now, we’re pretty heavy on the construction because it is what we’re good at. We are about 90% construction and 10% retail. We’re very heavily construction oriented; that’s been our biggest hurdle, trying to even the company out.

Is that just legacy reasons?

We were built as a construction company and didn’t really do service until my uncle and mom took over. It just wasn’t something that was focused on. Even when my mom and uncle were running it, we were just never able to make it grow; that would be a better way to put it.

Why was it so difficult?

Our market is saturated with air-conditioning contractors. I think the last I heard, there were 1,100 or 1,200 air-conditioning contractors registered in the area that we work in. There is a lot of competition. But there is not a lot of competition in construction. That is where we decided to focus our efforts. There is good money in construction; you just have to do a lot of it.

Are most of the contractors in the area really small, one, two or three man bands, that are only doing the service side of the business?

Yes. There are a lot of those. I always thought that, as a bigger company, you would be able to provide better pricing but it doesn’t work that way. Once you learn the business side of it, it becomes obvious that it works in a different way. You can’t provide cheaper prices than the one, two or three man companies, just because your overhead is so inflated. We have much higher costs and it’s impossible to compete with those guys.

In the service business, it is very difficult to undercut those small contractors?

Yes. There is a lot of competition; there are a lot of guys that do it for very small amounts of money. Then you’ve got other people, on the other end of the spectrum, that are just price gouging and we’re trying to land somewhere in the middle. We don’t want to be the cheapest; we don’t want to be the most expensive. But we want to provide the customers with a service that they want to keep calling back for. That was the ultimate goal.

Going back to 2008, 2009, if you’re in construction, you must have really been in the thick of it, in that downturn?

Oh, yes. We had hundreds of files that had to be thrown into the garbage. They were sitting in the filing cabinets, waiting to go. The purchase orders go out, the packages get made and a lot of the production house is print and go. They were already made, sitting there waiting, and they all got dumped in the garbage because they all started cancelling.

What is your outlook for the new construction market in Florida, for the next two or three years?

It’s pretty good. A lot of people want to weigh our business on the politics and the current climate change. But we kind of live in a little bubble down here. I would say, from Orlando south, in Florida, there is that bubble where people just want to live here. There is always a steady flow of people moving here; especially with the northerners and with what has happened lately, I think people are going to move here, in droves. I would say that the next couple of years are looking pretty good for us.

You’re not expecting some kind of lull, on the back of the boom that we saw since the last recession?

I would always expect something like that, but that always ties back in to the area that we live in. It does fluctuate a lot. That is the one downside of construction. We go through periods where we are very, very busy and we don’t have enough people and then, right now, we’re a bit slow. It comes in waves and you try to manage that as best you can. I think what you are talking about is an economic slowdown. Of course, you are always going to have that. It’s hard to plan for it; you don’t know when it’s coming. You try to project but you’ve just got to run your business and hope for the best; that is the plan that we go with.

There was a big crash, obviously, in 2008, 2009, then we saw a bit of a boom after that, with new construction. Then, I guess, we get into that 10-year lapping period of, potentially, a new cycle. But do you think we are going to see renewed growth due, as you said, to the migration and demand of people moving to the area?

Yes. The news itself will tell you that people are moving. If you follow market trends or real estate outlooks, back in February, when all the pandemic stuff started, we were still getting told there was going to be a four-quarter explosion. Some of them told you they expect 20%. I think they were pretty close, because our orders in September just started exploding again. The builders are heavily focusing on the people that are coming here and they’re getting the inventory ready to be purchased. As of right now, we have nothing to buy. I am hearing all kinds of stories of people that are getting over full price offers on their houses, because there is nothing to buy. As soon as it goes up for sale, it’s sold. That’s a great problem to have.

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Watsco: A Customer for 40 Years

November 17, 2020

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