Conditioned for Success

To understand why there are so many fly-by-night air-conditioning repairmen out there, consider Theodore Etzel III's dilemma.

Etzel is a man who plays by the rules. The president and CEO of Conditioned Air of Naples recently won the Business Ethics Award from the Uncommon Friends Foundation in Fort Myers.

But the regulatory environment is so difficult in places such as Collier County and enforcement is so lax that executives like Etzel who abide by the rules get unnecessarily penalized. That's because competitors routinely skirt the rules to avoid regulatory costs — and they get away with it.

For example, Etzel has had to hire an additional full-time person just to manage local permits, while some operators never pull the required permits for work. Conditioned Air has to provide a ladder for inspectors to check on their work because the municipalities refuse to buy one for their own inspectors. One employee is charged with dropping off and picking up inspection ladders from various job sites, if it hasn't been stolen in the meantime.

“I'm expecting permit fees to go up again” in Collier County, he says. They've already doubled from $75 to $150 to change out an air-conditioning unit. When he asked why they doubled the fees recently, bureaucrats told him because permit volumes had declined and they needed the money.

Etzel knows some of his competitors won't abide by the laws. “Fair is where you get a hot dog,” he quips. But, he adds, “All I want is an even playing field.”

Still, Etzel doesn't sit around complaining about his competition. Conditioned Air has become more efficient by equipping his 120 service vans with GPS systems so dispatchers can track their whereabouts and assign them the closest next job. “The marketplace will not pay for inefficiency,” he says. “Here's the No. 1 social goal: Stay in business.” Revenues rose 35% last year to $24.5 million.

Conditioned Air has developed a loyal following because of the way his employees are compensated. Unlike many competitors, Etzel's technicians don't work on commission. So instead of trying to sell customers a new air-conditioning unit, they're focused on fixing existing ones. A service call by Conditioned Air costs $99 while a rival might cost $29, but you can bet the lower-priced service call will make the hard sell.

During the real estate boom, Etzel planned to expand to Sarasota, but he put off those plans when the downturn started to take hold. He remembers national homebuilder Pulte telling him in July 2006 it wasn't building more speculative homes. “Let's focus on our own backyard,” Etzel remembers thinking at the time.

Now, Etzel says he's seeing some improvement in the new-homes market in Sarasota. “What we hear is that they're mainly cash buyers,” he says. In particular, Europeans and Canadians have been aggressive homebuyers because of the relative strength of their currency.

In Sarasota, Etzel says he's planning “several hundred” installations of new air-conditioning units out of about 2,000 in total for his company this year. Roughly half the company's revenues this year came from new installations and the other half from service and maintenance of existing units. Conditioned Air now has about 9,000 individual maintenance contracts.

Until recently, Etzel's main business in Sarasota has been with new homebuilders. Now that he has established a foothold in Sarasota, Etzel plans to expand service and maintenance for residential and commercial customers there, just like he does in Fort Myers and Naples. “The market area resembles what we find in the Collier and Fort Myers markets,” he says. “This has been in the works for a long time.”