Debt-Ridden HVAC Owner Battles Back From the Brink

Business-development organization helps small companies fill the information gap.
Debt-Ridden HVAC Owner Battles Back From the Brink
Mary Jean Anderson

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By almost any measure, Anderson Plumbing, Heating and Air in San Diego, California, is a dynamic, successful business, as evidenced by its 170 employees and about $28 million in annual revenue. But as Mary Jean Anderson will attest, it hasn’t always been smooth sailing since assuming full ownership in 2006.

Facing a deep recession and an acquisition that didn’t work out, Anderson was dangerously close to losing the company in 2009, when she was rescued by the Nexstar Network (www.nexstarnetwork.com), a business-development organization that helps independent plumbing, heating, air-conditioning and electrical contractors get back on course. Based in Minneapolis, Minnesota, the organization was founded by plumbing industry pioneer Frank Blau, who popularized the concept of flat-rate pricing.

Anderson’s problems began in 2007 when she decided to expand her plumbing business into heating and air-conditioning services.

“I thought it would be easy to add on, since I was so great at running a successful plumbing company,” she says, tongue-in-cheek.

After doing what she thought was proper due diligence, she bought an HVAC business for $500,000 in 2006. But the company wasn’t as financially sound as it appeared.

“It turned out to be nothing but smoke and mirrors,” she says.

By 2009, the HVAC business was $1 million in debt.

“I was bleeding the plumbing company dry, as well as my own personal assets, to keep both of them going,” she says. “In desperation, I reached out in every direction I could for answers. Failure was not an option.”

Q: How did you discover Nexstar?

A: Through the internet. I think I Googled “heating and air consultants.” I was very impressed with what I learned. I actually didn’t have the money to sign up, but I felt very strongly that it was something I couldn’t afford not to do. So I used a credit card to join.

Q: What convinced you it would be a good idea?

A: Nexstar gave me some references, which I checked. I talked to a man named John Conway, who (at the time) owned Conway Home Services in Tennessee. John told me that he, too, had been $1 million in debt and worked his way out of it with help from Nexstar. In fact, he eventually sold his business for millions of dollars and now works for Nexstar. His story was exactly the same as my story … so I joined.

Q: Was it a good investment?

A: Joining Nexstar was the best investment anyone could make. If you’re willing to leave your ego at the door and do what they advise you to do, there’s no better investment. But it would be a total waste of money for people who want to do things their way and don’t want to make the suggested changes. (For information about membership fees, call Nexstar at 888/240-7827.)

Q: How does the network work and what benefits does it provide?

A: Right away they assigned me a coach, Jodi Peters, who’s still my coach today. I was very aggressive because I knew I needed help right away. I told her I was planning to increase the profitability of the plumbing division to pay off the debt and close the heating business. But she said, “Whoa, whoa, whoa — first give me six months.” I said OK and she put me to work right away.

Jodi pointed out everything I was doing wrong — and it was a lot of things. One of the biggest errors was paying (HVAC) installers and technicians the same way I was paying plumbers; the profit margins in those two businesses are very different. I was overpaying the HVAC installers and HVAC maintenance technicians. I had to restructure our pay scale and also restructure our equipment purchases, because it turned out I also was paying too much for equipment.

Q: How else did Nexstar help you?

A: I don’t think you have room to explain all the ways they’ve helped. But one great area of savings is the discounts that members receive on many business purchases, plus a 2 percent rebate from equipment manufacturers such as Lennox International and Goodman Manufacturing Co. (both companies are air-conditioning manufacturers). I was able to reduce expenses right away by switching to Nexstar-approved vendors.

The best part of it is I don’t pay a dime anymore for my membership dues — it all comes out of my rebates. We get about $18,000 a quarter in rebates because we spend millions of dollars a year on Nexstar partner vendors. The cool thing about this was that we already were using most of the vendors.

Q: What other benefits do you receive?

A: Twice a year they have a huge event where they introduce new business and networking opportunities. The value of networking with people from outside of your community is so valuable because they’ll share information and tell the truth (because they’re not local competitors). It was so valuable that I formed my own regional Nexstar networking group. We eventually got big enough that Nexstar said they would run it. Now it includes about 40 companies from all over California. We meet quarterly and share information and ideas specifically related to the state of California and about what’s working for us and what’s not.

Q: What is the time commitment?

A: Whatever you want to put into it. They have everything you need to run a successful business, including how to charge properly to cover your specific overhead costs, how to advertise and how to market your company. I did use their marketing ideas early on, but now we have such a strong brand that I don’t need to use their precreated marketing pieces. But when I did, it was awesome.

Nexstar is awesome for small contractors because they just can’t afford to hire all these people, like marketers and salesmen who do bids. They also offer a job-cost calculator; you just drop in your specific overhead numbers and it tells you exactly what to charge so that you never underbid your work.

Q: How long did it take to turn around your business?

A: I joined in 2008 and by 2011, I was debt free. I now run both divisions with double-digit profitability. And I’m able to pay generous employee wages and benefits. I can afford to do everything I couldn’t do before, which helps us keep the best employees. Nexstar literally saved me.

Q: Generally speaking, do you think there are a lot of contractors who could benefit from Nexstar and if so, why?

A: I think there’s a huge need. People with mechanical minds decide to go into business for themselves … but they don’t always have the business mind that’s necessary to make it work. It’s just not how their minds work. And before they know it, they have to put a financial statement together and they don’t know how to do that. And pretty soon you have to be a marketer — but you’re not a marketer, you’re a plumber. Nexstar helps you fill that gap — helps you do the things you’re not good at doing.

I think that as contractors, we need to champion what we’re good at and give the other work to someone else. And with Nexstar, you just pay the monthly fee and you get all that knowledge at your fingertips. You can stick to what you’re good at and let other people do the rest. Why force a square peg into a round hole? Think of how much further we all could go in life if we just do what we’re good at, rather than trying to be something we’re not.



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