Talking About Private Equity Tactics

On my behalf, attention please. The show starts in 10, 9, 8... Hey guys! It's been a while since I've done a live. And I was really... I mean, there's some stuff I've been wanting to talk about. Something that's just been bugging me in the back of my mind, but we'll get into it. And that subject is in the title of this video. But first of all... How have y'all been? A lot's been going on. It's a new year. I don't have a guest tonight. There was somebody I wanted to bring on to talk about this subject because I know he's a small business owner and he feels the exact same way that I do. Let's see what this comment is about. Okay, yeah, this is a good segue into what I wanted to talk What is happening all over the place, it seems, is small companies are being bought out by private equity firms. And private equity firms really only have one goal, and that's to make as much profit as possible. And it's obvious in their tactics. So I think everybody who works out in the field may have some experience with this, but it just seems like a really bad time. The equipment is already at least twice as expensive as it was about five years ago or maybe six years ago now. And then you got companies with tactics who want to, it's like they're trying to get rich off of every customer. It's like the main goal is just to make money. There's nothing wrong with making money, but a service company, in my opinion, should provide a service. That the customer is willing to pay for that should be the, that should be the goal of any service company. But nowadays, the goal of the service company isn't to provide the service. That's not their primary function. Their primary function is to make massive profits. And it's the customers who can least afford it are the ones that are, that are paying this. I see it around me, there's a couple of companies around here that It may not be private equity, not technically the way that term is being used. They do have private investors, which is kind of like private equity, but they are adopting the tactics of private equity run companies where, I'll give you an example, a preventive maintenance. The cost of my preventive maintenance is high because I give a good service. I try to check everything and do a good job. I'm not there to try and generate income. I'm not there to try to sell them something that they don't need. And that's happening all the time. I was just texting with my friend Jake, and one of the complaints that he has is about companies saying, oh, we can't do anything with R22 equipment at all because it's outlawed. They don't even produce it anymore. First of all, they don't produce it, but you can still buy it. It's still available. And you can work on it, and sometimes you can offer an alternate refrigerant. Using tactics like he was describing is just predatory, if you ask me. When you get called to a house because of a no heat or no cooling call, you're there primarily, in my opinion, to fix. They want you to fix it. So that should be the first thing you think of when you get there, not selling them a new piece of equipment. And I just see it all the time. And unfortunately, in my area, the companies that are using these tactics are some of the biggest companies. And it's just real unfortunate. Let me see what this one says. Profit is a primary function of the U.S. system. There is no consideration for anything else. People are just the place where profits can be sucked from. The system doesn't care about people at all. To a degree, that's why I am making this video. You know, it, um... It's unfortunate. Um, I feel like more people need to speak out about it and the companies that are doing it in our local areas need to be called out on their tactics. For example, a change out. There's nothing wrong with doing a change out when one is needed. But when you do a change out, you don't have to push air purification system. You don't have to push a Wi-Fi thermostat. You don't have to push a UV light. You don't have to push maybe a whole new duct system unless it's necessary. But that's kind of what these companies are doing. I want to give my customers a service that they're willing to pay good money for instead of making them pay good money for something that they may not need. And that's what's happening. And it's seeing it happen is frustrating. And it's not just happening in HVAC or in other trades. It's happening in companies. that HVAC and trade trades companies use. But I'll get into that. In fact, I have pretty much chosen not to call out this one company by name, but y'all will be able to figure out who I'm talking about pretty easily. I'm just looking at somebody's comment. Let me see. NorCal is rampant with these type of companies, plus the employees are pushed to lie still in order to keep their job with astronomical prices. It is forcing some people to do unethical work. Forgive I'm going to pause this and holler so she'll turn down the TV. All right. I see it over and over. Technicians complain about it. It's just frustrating. And I just feel like more needs to be said about it. And it's like the customer base, if you're running an honest company, an honest service company, who's trying to provide value. that your customers are willing to pay for and make your money that way instead of making your money out of charging them for things they don't need i feel like it's part we need to educate our customers about the tactics of these other companies because for me even as a company as a long-term desire of a company is to stay in business you know make a career out of it or maybe pass it on to your kids or something But if all you're doing is just trying to milk every customer for every penny you can get, to me that does not seem like a good long-term strategy because eventually people are going to get wise to it and it seems like you go out of business. That would be the Nashville thing around here. One of the biggest companies in town here has been using similar tactics and they've gotten really bad about it. And now instead of them dominating the entire market, there's like three companies that share it. So it is affecting them and their tactics. I mean, they're just pushing for profits. Sorry to hear that. And one of the other things I wanted to talk about, which is very related to the same subject. I've been using a CRM a lot this last year. This CRM uses the same tactics. Instead of giving me a product that I'd be willing to pay a lot of money for, they give me a product that has built-in deficiencies that they will sell and add on to correct those deficiencies. And here's one of them. This is the one that really gets me. With this particular CRM, you can notify your customer you're on the way, but if you pay an An extra subscription and you buy this. GPS tracking device. The customer can see you in route to their house. Okay. First of all, they can do all that with the information that is on your phone or your tablet, whatever you're using. You can just share your location and they can use that. They don't want to do that. They want to sell you something. And second of all, I've gone back to using Google Calendar and I'm going to explain something to you that's really neat. If you put in the address and the phone number, even if it's a rental property in Google Calendar, when you click on the address and you're on your way, you can share your location. And because that phone number was in the Google Calendar, when you clicked on that address, listen, I use an iPad, at least on my iPad. When I do this, When you go to share your location, that number is listed down there, and you can share your location, your position in route with your customer for free. It's on every iPad or iPhone, but this CRM company wants to charge me something special to do something that I can do for free. This particular CRM company is not public, not yet, but they are managed by a board of directors and several members on that board of directors are fund managers for private equity firms. So go figure. I'll tell you, just doing tactics like that, I've about had it. Don't try to sell me something that I can do better for free with stuff that's on my phone. Well, tell me, does Service Titan do something similar? I'm purposely not calling them out because I had one of their employees on my show a few weeks back. If you look back, you'll know who I'm talking about. Good evening, Gray Wolf. I came on live tonight to complain about the tactics of I know businesses owned by private equity firms or the businesses who have adopted those tactics. I know another business owner who has bought into these tactics, and he just started his business, and every call, he's trying to make as much money as possible on every call. There's nothing wrong with making money, but it seems like most of the time we are there to fix a problem, not to be salesmen. Many of my customers recognize that I'm not there to sell them something unless they need it or if they ask for it or if they just have to have a change out or something. Yes, I'll sell them something. But that's not why I show up. I show up to fix a problem. That's the way every service technician should be. First mindset, fix the problem. If it can't be fixed, okay, then we'll talk about replacement. I just. I don't know. Maybe some of my customers are just low income or something. And I empathize with them. I mean, just the cost of a change out now, just a regular change out on like a three ton package unit might be over eight thousand, nine thousand dollars. And I feel guilty giving an estimate for that much when just like five years ago, it was less than half that. So. It just don't seem right to try to add on extra stuff to make them pay more when... What difference does it make to the system? If it don't make any difference, why are you doing it? Or, I know why you're doing it. It's for profit. No. He's listing three things here. Diagnostic, resolution, prevention. Are these the three things that... The steps that you take when you show up on a job? Diagnostic, resolution, and then prevention. I can kind of agree with that. I just, I really dislike this mindset of salesman first. That doesn't benefit anybody except business owner or shareholders, depends. And even private equity firms is kind of like a public company that's not public, but investing is capable amongst. Approved investors, that's like a pre-IPO investment, and that's how many of these firms or companies handle things. They're not public, so you've got to be, and there are platforms that let you invest in companies like that, but like I said, you've got to be approved to be able to do it, which means you've got to have a lot of money. But anyway, anyway, that, that, that was my rant. I'm just, I'm tired of seeing people getting taken advantage of and it's just not right. And it's not just at their expense, the customer's paying a fortune for something that they didn't have to, or for example, like I was talking about the preventive maintenances. I was talking to one of this, this big company's technicians at a supply house. And he basically told me their preventive maintenance is the only reason they go out is to try to sell them something. So they come out twice a year to try to upsell you instead of actually doing a quality preventive maintenance. Who does that benefit? Nobody except the business owner. And that particular business business was started by a guy who was a technician just like me, Nate grew the business until he had like 200 something employees during the summer. He retired, he may be dead now, and the business is run by children and children's spouses, and these are the tactics, and they took over the service department and everything with no HVAC knowledge, and all they want to do is push profit, profit, profit, profit, and actually they are losing their share of the community because of it. All right, ha, 8K, NorCal PE Company. Charge neighbor $18,000 for split system, R410 attic placement, no ducts. I've had six service calls to their house, and I know prices are high in California, but man. Here's another one. Hi, HVAC guy. I'm fairly new. I've watched you in the past. I'm not an HVAC person, but I'd love to see you go about your daily work and tell the truth. I've also learned a lot. Well, thank you. I hope you tuned in earlier because I was... I was trying to drop some truth bombs. Here's another one. 18,000 two-bedroom, 1,000 square feet. Is that all new duct work? Zone system? Man, some of the places I work on, the whole house don't cost that much. That's unfortunate, but that's true. Like today's video, that was real low-income housing. But yeah, if the people watching, the technicians or other business owners are watching, and you disagree, With what I'm saying, that we should be a service-based, provide a good service, repair first, fix the problem first, and then maybe sell something. If you don't think that's the right tactic, feel free to comment. I mean, I don't think just because I don't like it, don't mean there aren't some good reasons to do it. And I think all those reasons are money, but there might be some good reasons to do that. 30 to 40,000 in Texas, that has got, what? What are you thinking? I mean, my typical system, the price of equipment, $3,500, $4,000 for equipment. What do I look like charging $35,000, $40,000? A thing better be made out of platinum than charging that much. I mean, y'all are sharing these prices. I'm not half believing this. In Charlotte, I got some family right around Charlotte, really close in South Carolina, Rock Hill, $15,000 to $40,000 depending on... I just don't seem right. I mean, as technicians or business owners, that's not right. Yeah. I mean, I'll give you an example. I just did an inverter system, five-ton, new line set, everything. And it didn't top $13,000. And I still made good money. I don't, I don't, you shouldn't be trying to get rich on every customer. In fact, Eddie, that inverter system that I was just talking about was an Amana. I like it. That reminds me I need to register the warranty. Oh, my word. A Lennox system starting at $13,000. I don't know if Lennox have improved, but they used to have a terrible reputation for leaking evaporator coils. But anyway, I guess that's my rant. It's not just the companies providing the service and doing the installations. It's the whole industry. Like I said, the CRM companies. They're trying to do it to us, too. I basically, that CRM I was using, I just cut them out. And I'll give you an example. The same CRM company I was complaining about, they offered a complete bookkeeping service, and it was like $400 a month. Here's what this complete bookkeeping service does. All they do is use your bank statements and generate reports. That's it. You can't enter bills with specifics being inventory when you enter a bill that it keeps track of the inventory you can't make a list of all your payments so checks that you've received to do a deposit none of that and they want to charge you four hundred dollars for I mean that's ridiculous I think they called it an accrual accounting system and I was like you know I got to be able to have records of what I bought Um, when I bought it, um, when I enter my invoices, I detail exactly what I bought, how much it costs, the taxes and everything. And they're just basically saying, ah, just pay your bills at the end of the month and we'll buy it. And that's supposed to be a professional accounting service? No. Let me see. Carlos has arrived. Hola, Carlos. Espero que todo está bien con ustedes. 400 a month. Let me see what he's talking about here. 400 a month. That's what company Timelight uses for software. I'm not sure what he's talking about there. Um, no. But, man, it just, I mean, what kind of accounting software don't have specifics? I mean, they just, maybe that's enough of my rant. Feel free to share your stories. I know I'm not going to be on long tonight because I don't have a guest. Carlos, you're welcome to come back on the show anytime you want. Maybe we should do one in Español. I would enjoy that. Let me see here. I installed Linus' equipment in some of the worst units I worked on. Half the stuff Linus does makes zero sense. Dave, Lennox would be rolling in his grave if he saw modern day company. I used to work for home warranty companies. I did. I didn't enjoy it, but, you know, it fills in the blank spots when you don't have a lot of work. And I remember specifically, I went to a Lennox package unit that was four years old, and we could not get an evaporator coil for it for months. These people went on for months trying to get an evaporator coil, And eventually the homeowners forced the home warranty company to pay for a new unit because they couldn't repair the one that was there and it was under warranty that's ridiculous, I mean horrible. Talk about customer service, don't even have the parts for the equipment that you sell, that's bad. Yeah, don't get started on these prodigy boards and you know, I remember some of this stuff. I don't do a lot of rooftop stuff anymore, um, I try to keep it residential I'm more comfortable there. On, let's see, Oh, hold on just a second, I'm trying to follow this HVAC leases for change-out lease-to-own programs. Okay. We can't do a $700 fix on your blower motor, but how about $120 a month for I'm actually almost saying verbatim what my buddy Jake texted me earlier about people not wanting to work on R22 systems. We can't work on it. It's illegal. Um, we'll lease you a unit for the next 120 months. Yeah, it don't seem right, does it? It don't seem right at all. And according to the lease, does include all maintenance and repairs as needed. 10 years lease. What happens after that? They come out and you're going to have to buy a new one? I know what's going to happen. I almost think I missed. Which podcast are you talking about? Are you talking to me? Are you talking about HVAC Nights? I actually... I contacted Jake to see if they were going to be on tonight because I didn't want to interfere with their podcast. Thank you for watching this podcast. And I don't think they are. If they are, y'all correct me. I don't think that was the plan. $100 a month for 30 years. All right, here's Jake. Speak of the devil. If you don't pay the lease and they throw in a lien on your property that the homeowner has no clue about, 20, 30. No, I didn't know about these leasing programs. Those haven't hit around here yet. Um, there's always, we've got like predatory finance options, but that's a new one for me. It was like hitting a whole new low. Okay. Blackout bass. If I were to speak Spanish, the question is, would you understand me? Hello from Virginia. Y'all might be having a cold front come through. That's going to hit us this weekend. All right, Jeep Cherokee guy. Yeah, I'm in commercial and do wrap refrigeration. I thought I had seen some sketchy crap in residential. Oh, racks are worse. Ever seen a suction line held on a compound compressor? Zip ties? There's a guy who likes to comment on my videos. He calls me zippy because I use so many zip ties. He would love that word. Yeah. In fact, speaking of AI, I've got news for you. I am. I'm developing a store. to sell the tools that i use in my videos and some nice merch with my logo on them using ai i just started doing it a couple days ago and it's already looking pretty good i mean it's actually live and i can collect money and ship stuff out on i'm not actually gonna there's there's an option where you can do like a Amazon store but you have to actually buy the goods and then pay Amazon to store them. and then sell them out of your stock but what i'm going to do instead of just is just do like an amazon affiliate thing where you get three percent but it's still on my store and i'm going to get a company to help me out like dashery or something with the merchandise so y'all stay tuned for that it is coming soon let's see here this one almost it blows my mind where we're 10 year lease on a 25,000 linux system It costs $5,500 for equipment plus maintenance after a 10-year company sees $50,000. I can see why they're doing it. It might be underhanded, but you see the motive right there. I work on very few Daikin label systems, but that's partially because we don't have a Daikin distributor in town. Goodman, Amana, Daikin distributor, but one is coming this year. It's going to be here. That's a Johnstone. So, um... Hopefully soon. We still don't have a Trane or American Standard distributor in town. The closest one is like, is in Columbus or Macon, and it's about the same distance, about 90 minutes drive from here. So anytime I need a part for any Trane or American Standard, it's going to be at least a day. OEM part, I cannot get same day. Ryan, a comment about the AI. I think AI will force some HVAC price transparency because people are using AI to search for HVAC pricing. And if your price isn't listed on the website, your company might not be in the search result. The only pricing I could even think about listing would be like for parts, like change outs. Somebody who was just in the comments, Carlos, he has like a calculator, like a website where You are. Your house, maybe the address, the size of the system, what you want. And his website has a calculator, which gives the customer an estimate on a change out. That is working for him. And me, honestly, I'm scared of something like that because there are too many unforeseen things to just show up on the job. And I like to look at it first. That's just my preference. But that is working for him. And he's getting a lot of business from it. At least, that's what I think. That's what I last understood. I hadn't talked to Carlos in a little while. I think he was the first person I had on this show. So let's bring him back sometime soon. Let's see. Eddie's talking about the Daikin systems. Well, Daikin bought Amana and Goodman. So, yes, I agree. They should be interchangeable. But that is good. And I got to say, I feel like Daikin... really did a good thing when they developed the R32 into using their equipment because this 454 that there have been some problems with it um especially when it first started coming out um the rumors of it fractionating and stuff like that but you didn't got to worry about that with R32 because it's not a blend so um to me that's an advantage with the Daikin systems Let me see, Carlos is using a pre-qualifier Um, I don't know. I do not know if he's in the comments. Maybe he can answer that. To the point where some of the techs are being unscrupulous and selling equipment that people do not need. Yes, but it's, it's more of the company's fault. I mean, the techs are only doing what they're being told to do. If they're being pushed to sell equipment, that's what they're going to do. Or if they're giving them... quotas that they need to fill. That's what they're going to do. Or if they get commission for selling parts or if they, I did work at a company that gave me commission when I sold units and I sold units, but I have always been repair first. But when you know you're going to get like a 5% commission on it, that's incentive to sell a new system. I'm not saying that that In particular, is underhanded, is profit-driven, but that is not as bad as this leasing systems that I'm hearing about now. I mean, I don't know. That was a new one on me, and that's just, that's crazy. Just, uh, I am a maintenance technician, almost four years of working with a good company, and with my studies and experience, it feels like getting every day what I was studying. Okay. Sounds like he's doing all the job, what he's been learning in school. Carlos may be answering that question for you. Yes, I installed personally a couple of equipments using that method. The price was calculated with precision. I haven't had any problems so far. I think, Carlos, what they were talking about is if, I don't know if you would have to use a pre-qualifier because that doesn't mention anything about financing. So I think that's what he was referencing, that you pre-qualify for a finance option, but nothing you have said has mentioned that you're financing those installs. But yeah, in the comments, y'all are proving my point about the profit-driven companies instead of service and quality of service-driven companies. Yes, we have salesmen. 9% on 25K looking pretty good for them. That does look pretty good. Forgive me, I'm reading your comments. Well, guys, yeah, today, first, I just wanted to touch base with y'all. I've been kind of under the weather myself, and we've just been dealing with stuff here at home. And it's been a couple weeks since I did a live and I've just been wanting to talk about this private equity thing because it just seems completely unfair to the customer. And to me, the customer is what funds your business. So it's like biting the hand that feeds you. I do not like the tactics at all. And I know it's happening in other trades too. I know it is. And in a lot of businesses it's happening so when you see somebody giving you a fair job for a fair price, you know, stick with them. That's just reward them with more business because that's why they're trying to give you a fair price and do fair work. I mean, that's just my motto. That's just how I'm going to do business. I may for around here, my labor rate may be high, but I'm giving them the quality of service that demands that high labor rate instead of selling them something. So I think that's what we all should be doing. Well, we'll go through a few more comments. It's like Monopoly trying to wipe out the small mom and pop shops. I have been approached by one of these private equity companies to try and buy out my business. I was like, you got to be kidding me. First of all, there's no way you would pay me enough for it. And second of all, you're going to want me to work on for you for about a year. I do fine, just like I am. I have a great income. I enjoy what I do. They ain't going to buy me out. That ain't happening. All right. It's interesting working in a profit-driven company. With all my side work, I operate completely different from where I work. You know, I can understand. I never, when I worked at other companies, I never really worked on the side. I was trying to be a good employee all the way up until I wasn't. And that meant I was starting my own business and competing with them. And some of the companies saw that I was going to start my own business. And actually, two of them, when I saw that coming, they fired me. Have I done duct cleaning? Yes, I have done duct cleaning with another company. But for me, as a one-man show, some of the equipment, the good equipment for duct cleaning is expensive. I would need somebody to help me. If I'm not mistaken, Carlos, you've got maybe two people helping you now. I know your wife's with you. I think I have seen in a picture there was somebody else working with you. Let us know if Freeze the Heat now has three working for them or if it's two. Let us know. All right, now we're going to discuss what he meant by pre-qualify. Pre-qualify means that they know what the cost is going to be before you come to the repair and replace. Okay. He wasn't talking about financing at all. So yeah, that's pretty much what he's talking about. That's what he's doing now. Music City HVAC, 11 year old leaking coil new systems, 5% commission plus hourly. Yeah. I mean, if a system needs to be replaced, I'll give you an example. Even like a 10 plus year old 410 system right now, if it's got a leaking coil, in some In some cases, you can't find a coil, so you might be looking at a change out anyway. yeah but for me um i make i make good money doing an evaporator coil replacement in fact i'm doing one tomorrow so y'all have to tune in and watch that video it's in a mobile home and i'm doing something i'll tell you what what i'm doing tomorrow this is a 410 system you cannot buy a 410 mobile home coil anymore i'm going to replace the coil and what i'm doing is i'm using an r454 coil on a 410 system It's my first time doing that. So we're going to see how it works out. I think it'll be fine because I basically engineered R454 using 410 equipment. So it should be fine. I have my own little poly a HPACR one day soon. Yes. Well, Chess Tom, I will tell you this. If you ever open your own business and you get paid what you're really worth instead of an hourly wage, you will never want to go back. It's nice. Thank you, man. You didn't have to do that. What do you think about Riello oil burners? Dude, we don't work on oil. We don't work on fuel oil down here. In fact, the very few fuel oils I've worked on, I've replaced with a heat pump. Some of the old houses, we have some antebellum houses in some of the towns by antebellum. I mean, pre-Civil War. Houses in like Cuthbert and maybe some in Tipton and something like that around here. In some of these old, old houses, there is fuel oil. And I'm not the best at working on them, I'll be the first to admit, because there's just not a lot around here. I was kind of thrown into those as a technician. You know, hey, go do a PM on this system. I get there and it's a fuel oil and I knew nothing about it. Nothing. I didn't know I had to change the nozzle, I didn't know I had to change the oil filter, I didn't know how to bleed the lines if I did change the oil filter. I mean, nobody prepared me, but I changed the filter, checked amp draws and capacitors, and came out of there smelling just like diesel. Well guys, I'm gonna leave it there. I think I have ranted long enough about the private equity stuff. I do hope some of y'all got something out of this. I hope that what you got out of it is there's more money in leasing an air conditioner than there is in selling one. I hope that's not what you got out of this, but treating people right is the better option and the better long-term goal for a business. Guys, thanks for tuning in. I'm glad to be back live with you and we'll try to come back live next week. So y'all stay tuned. I hope you enjoy my videos and