HVAC: Expanding Horizons

Thomas Montgomery, North Regional Director of Mesa Energy (dba EMCOR Services Mesa Energy), shared his expertise during SMACNA’s 81st Annual Convention in Palm Desert, California, providing invaluable insights into why and how businesses should take the leap into commercial services.

About Mesa Energy
As a licensed, full-service HVAC, building automation and retrofit contractor, Mesa Energy combines high-quality consulting services with efficient, cost-effective customized energy solutions. The company’s experience spans nearly every major industry. 

by $250,000.

Building a Sustainable Future
Montgomery began his convention talk by highlighting the shift in market dynamics happening in the commercial space. “In 2024, the U.S. mobile service market is projected to hit $80 billion, and by 2034, it’s expected to soar to $146 billion,” he notes. This growth isn’t just a number; it represents opportunities for HVAC businesses willing to adapt.

Adding commercial services allows HVAC businesses to tap into recurring revenue streams. Montgomery compares it to the utility industry. “When you build up a customer base with automatic billing, it becomes a continuous revenue-generating machine,” he says. This stability is particularly attractive in industries prone to seasonal fluctuations, offering a consistent buffer against downturns.

The Value of Service Over Construction
One of Montgomery’s key points was distinguishing between mobile service work and traditional construction projects. 

He emphasizes that service operations require a unique approach. “Service is a reactive business,” he explains. “Your technicians need to be prepared to tackle unexpected challenges, often with limited lead time.”

The financial upside is clear. Montgomery cites that while construction projects may yield a gross profit margin of 15% to 20%, well-optimized service operations can achieve margins upwards of 35% to 40% on average, with some repair work hitting 60% or more. “The numbers don’t lie,” Montgomery says. “Service work not only commands higher markups but also builds a loyal customer base that leads to repeat business.”

Laying the Groundwork for Success
Transitioning into commercial services requires careful planning and investment in the right tools, people and processes. Montgomery outlines several key steps:

Leadership Expertise: “Having someone on your leadership team with a strong service background is critical,” he says. This ensures the operation is managed efficiently and aligns with the company’s long-term goals.

Tech Training and Tools: Commercial service technicians require advanced training to handle computer-driven systems, injection tools and complex diagnostic equipment. Montgomery emphasizes investing in versatile technicians who can adapt to various scenarios.

Operational Systems: From billing to dispatching, robust systems are essential for managing the fast-paced nature of service work. Montgomery recommends exploring modern solutions like Microsoft Dynamics to streamline operations.

Customer Relationships: Building trust is crucial. “Your best technicians are not just good at their trade; they excel at customer service,” he remarks, sharing stories of technicians who became indispensable to clients through their dedication and relationship-building skills.

Challenges and Strategies
Expanding into commercial services is not without its challenges. Montgomery acknowledges common hurdles such as pricing pressures, competition and the difficulty of finding and retaining skilled technicians. He stresses the importance of a well-thought-out compensation plan, including rewards for securing maintenance contracts. “It’s hard to be mad when you see those commissions rolling in,” he jokes.

For businesses looking to fast-track their service division, Montgomery suggests acquisitions as a viable option. “Find a solid operation with good systems and people already in place,” he advises. This approach minimizes the growing pains associated with starting from scratch and offers immediate access to an established customer base.

A Winning FormulaThe long-term benefits of adding commercial services go beyond financial gains. It positions businesses as full-service providers, increases valuation and creates opportunities for internal growth. “This isn’t just about making money; it’s about building a legacy,” Montgomery says.

As businesses look ahead, the message from Montgomery is clear: Adding commercial services is not just a strategy; it’s a necessity for those aiming to thrive in an increasingly competitive industry.