PODCAST: CM Heating – Building a Company to Impact Lives
James Garner and John Giacomi More Than Doubled Their Company’s Sales in Two Years, at a Strong Profit Margin, while Creating a “Disney of HVAC” Culture That Puts as Much Focus on Lifting Up Their Employees, Bettering Their Lives, as It Does on Sales and Profits.
Read on for CM Heating’s Success Story, or listen on our new The Successful Contractor Podcast, a show for residential contractors about residential contractors. We chronicle business journeys, share insights, and celebrate successes in this wonderful industry of ours.
CM Heating had an incredible 2019. Revenue jumped from $7.2 million to $11.4 million at a very strong margin for the Everett, Washington, based business. In talking with James Garner and John Giacomi, the business’ owners, sales were not the first thing these two were eager to discuss.
“We wanted to build a company that truly improves people’s lives,” John, CM Heating’s general manager said. “James [CM Heating’s president] has spent his whole life in pursuit of bettering people. When he and I met up, we said, “We don’t want to do this if we can’t be happy doing it. We started focusing on the user experience for our coworkers.”
James and John have implemented countless measures geared toward improving their employee experience so that their team will enhance the customer experience they deliver. Four-day workweeks were implemented. The company offers a robust benefits package, and the company offers industry-best pay. James and John put an emphasis on celebrating success and bringing everyone together as a team.
Last August, CM Heating experienced its first million-dollar-month in terms of revenue. James and John knew they wanted to thank their team for their robust efforts. James and John rented a movie theater for the entire company and their significant others. They had the event catered with drinks. “It was such a cool experience. We had a great time. We felt like it was a pretty small token. But seeing everyone so jazzed was what made it special. People were saying, ‘I’ve never been with a company that’s done something like this!’ It was very cool,” John said.
Team movies, professional sporting events, barbecues—those are just a few of the recent company outings for the CM Heating team. “We have made the company a much more culture-forward place to work with the expectation that we’re providing this because the company must also win. So, we’re getting elite-level performance out of everyone. They’ve done a great job,” John added.
A little more than two years ago, James and John didn’t feel as positively about CM Heating’s culture. “Not at all. We found that at the time, we were very much meeting the status quo, which was burning people up until they produced sufficient profit for us. They’d be burnt out and literally go knock on the next company’s door just because they would make a dollar an hour more.”
In fact, neither men really ever expected to be in the position they’re in today—not as business partners, and not even in the HVAC industry.
CM Heating’s Beginnings
James’ father, Paul Garner, started CM Heating in 1983. Back then, it was branded under a different name, Chimney Masters. The HVAC company today originally started as a business that cleaned and repaired chimneys. As James explained it, Paul branched into gas fireplaces and then gas furnaces by the late 1980s. With that new focus came the new name, CM Heating.
James did not take to his father’s industry initially. He began his professional career working in the non-profit sector. “Once I got into my mid-20s, I was getting ready to start a family, so I got involved. I took over pretty quickly as general manager. My dad was the classic technician turned owner where he didn’t really want to do the manager stuff. He liked the idea of owning the company, but what he really enjoyed was working with customers and fixing things,” James shared.
“2009 was my first year running the company. When I took over, we were at $1.5 million. We had been at that level for a while. We grew a bit, up to $2.2 million. But we were a hub-and-spoke system as opposed to having a true organizational model. At first, it was my dad in the middle with little spokes going around him. Then it became him and me in the middle. It really hamstrings you as an organization. You can only grow to the capacity of where one or two can take you.”
In 2012, unexpected tragedy struck the family and business. Paul was helping a friend paint his house. Paul fell off the roof and ultimately passed away. “It was quite a shock. He was a very energetic person,” James said. “Things had to change quickly for the business because he was our primary salesperson. The company really shifted at that point from being the Paul Garner company to where I needed to start implementing industry-best practices because I was not him. I couldn’t operate the business the way he did.”
James hired a new salesperson and began restructuring the business the best way he saw fit. “It was certainly a challenging transition for that next year or two,” he added. “But by the time, we came out of that transition, the company had morphed into the beginnings of what it is now.”
John Joins CM Heating
A new salesperson wouldn’t be the only addition James would make in those early stages of his new stewardship of CM Heating. In 2013, he hired a young service manager by the name of John Giacomi. After six years of working for a disaster restoration company, John was seeking to hit refresh on his career. He answered an ad on Craigslist. It was the best professional decision he’s ever made.
“James undersells himself a lot, which is an attractive trait. But when he and I met for the first time, I could tell things were different here. I could tell this probably wasn’t your average contracting company. James came from the non-profit industry. I think that same sort of care and heart that somebody in that sector would have was driving this company, more than profit or churning out as much money per manhour possible. James and I really clicked on that part,” John said.
“When James was talking about being the hub to the company with every spoke attaching to him, that was his reality at the time. He was the first guy in, last guy out, six days a week for a long time. Even after I started, he was bearing a pretty heavy burden. I think my position came out of necessity because the days weren’t getting any longer,” John added and then laughed.
By the time John had joined, James managed to grow CM Heating to about $3.5 million. With the two men working together over the next four years, they pushed sales beyond $5 million. Then they seemed to stall out. Their idealism to build a great workplace had lost a bit of its luster. The grind of long, hard days maybe even hardened them a bit. “Frankly, we were at a point where both us were like, ‘Is this worth it, if we’re always going to be grumpy?’” John asked rhetorically and laughed a bit. “Are we going to be grumpy guys that don’t really want to do the work and constantly churn in the turmoil and put out fires? We were kind of at the crossroads when we found SGI.”
Skeptical of SGI
James and John both were highly skeptical of SGI. They had been a part of another organization that overpromised and underdelivered. Still, they were seeking answers and decided to attend a Profit Day in December 2017. Ultimately CM Heating became a part of the SGI family. “We were still looking for this playbook. We didn’t want to reinvent all these things. We wanted the tried-and-true best practices being used nationwide. Just follow the recipe and the end product should be good,” John said.
When John attended the SGI Executive Perspective (EP) conference in January 2018, they quickly found they weren’t the only contractors seeking answers. “I was in a room full of 50 other people just like us. I could see we weren’t alone. Then you learn there’s 1,000-plus contractors in the group. They’ve all done these things and are being successful. It provided us with a breath of fresh air. We felt like we were on the right path pretty quickly at EP,” John said.
“So much of it is unapplied common sense, but it’s stuff we hadn’t been doing. Culture things like maybe our technicians shouldn’t be smoking on the job?” John continued and laughed. “And maybe we should be paying attention again to how happy our people are. Not that we weren’t before, but how do we do that? We came away from EP with a very long list of bullet points of things to employ, and the two of us started chipping away at it. We began to see incremental success throughout 2018 and a big surge in 2019.”
The Disney of HVAC
The financial success that CM Heating has enjoyed has allowed James and John to fuel their passions of impacting people’s lives—both their customers, but even more so their employees. They had to get the right people aboard—that certainly took a bit of time. With the right training and inspiration, the right people have become more like a CM Heating family, rather than a team.
John grew up in Southern California. He loved his grandfather dearly. He called him, “the coolest, happiest guy I knew.” John’s grandfather was an Italian immigrant who came to the US with nothing and became a great American success story. He served in the military, then built a small, successful landscaping business that primarily worked for Disney.
“[My grandfather] fell in love with this idea of a place where everyone can be happy—the people that worked there and the customers who came. It creates a certain culture of happiness,” John explained. “For me, that was a dream I had, but I didn’t think it would become a reality. So, I feel incredibly fortunate to have found a company and surrounded myself with a crew of people who are making that dream a reality.”
“John brought that Disney of HVAC concept to CM Heating,” James shared. “It meshes well with where I want the business to go in the future. My interest in life is to help people improve their lives. I want to try to make the world a better place. I think there’s great opportunity in running a business to do that. You can really impact the lives of the people who work so hard for us. We want to use this company as a way for them to improve their lives.”
This interview occurred roughly five months ago. I had the great fortune to talk with James and John for over 90 minutes about how they radically and profitably grew their business in only two years, while also greatly and positively molding the culture of CM Heating. I hope you enjoy our conversation—it is full of great insights from these two inspiring leaders and businessmen.
You mentioned your technicians weren’t wearing uniforms before you joined SGI?
John: We were wearing uniforms, but depending up on the department, we either exceeded or met the status quo of our market. But the status quo was pretty low. Like when you go to dealer meetings or trainings, you see the status quo is pretty low. There are a lot of people I wouldn’t want working in my house. People showing up to jobs with their shirts covered in mastic and silicone. Showing up like they had just gotten done working somewhere else.
I’ll be honest—I was a t-shirt and jeans guy for a long time. I have tattoos down my arms. If the general manager is setting the tempo, everybody else falls in line. Attitude reflects leadership, right? Going to EP, afterward I started falling in line with what we wanted.
We sort of had this concept of being the Disney of HVAC. If you go to Disneyland, it’s clean and pristine everywhere you go, right? I mean you could eat off the floor. And so, people pay more for that Disney experience because of the value statement that they provide. We felt that image was a very strong component of our value statement as well. Certainly, if we’re going to charge what we needed to charge to put an end to the daily fires we were putting out.
What other value components needed to change? How about your guarantees?
John: Yeah, the SGI guarantee set for AirTime was something that we deployed pretty quickly—the Satisfaction Guarantee, No-Hassle Guarantee™, No-Lemon Guarantee™, and down the line. We felt those were pretty compelling. And we made a quick and modest price adjustment at that time. It wasn’t really until this year where we felt our closing percentages were higher than they’ve ever been that we could charge more. We made a much larger price increase this year, which has led to both top-line and bottom-line growth.
What were your closing percentages beforehand and what are they now?
John: Before, we were happy to be closing mid-40 percentages, which was fairly high from what we understood in our peer group. And now we’re closing at 55 percent, but we have consultants that are closing at 65-plus.
Did you put StraightForward Pricing® in place immediately? And if so, what kind of system were you coming from?
John: Yeah, we did indeed. We were doing T&M.
James: Well, we weren’t on time and material…
John: No, we were using a calculation that roughly equated to time and material…
James: Yeah, it was home-cooked [laughter].
John: Yeah, home-cooked, flat rate—but we were doing it per repair, right? We would write out the base cost, then how much time spent, and we entered it into a computer to get our pricing. So basically, every time we went out to a job and performed a repair, we had to price it individually. We didn’t really think about it until after we implemented Straightforward Pricing®, but our customers were unsure about how these things go.
When we employed StraightForward Pricing®, the price is right there. We give you the price instantaneously. It’s black and white. There’s no modification of the price, unless we’re reducing it because you have a club membership. It was a very nice concept that was clean and rolled out pretty easily for us.
How was your understanding of your financials at that time? Were you departmentalized properly?
John: Yeah, we were departmentalized properly. We had a vague understanding of where we were making money and where we were losing money. It always seemed like service was a component that we were having problems with. It was very hard to turn a profit. Only recently, through our revised understanding of the department, have we really recognized the value of it thanks to SGI. Then it took finding somebody who would champion that department.
James: In the books we were reading, the focus was on service, which seemed counterintuitive to us because we make all our profit from install. Once we joined SGI, you said, “Yeah, we expect you to make 75 to 80 percent on install.” That was reassuring. It matched our viewpoint that all roads lead to install—obviously, in an ethical way. We want to explain the benefits. But from a business model, it matched our beliefs—that was reassuring.
What really changed for us, when we hired our service manager, we told him, “Your job is to feed install.” We got away from worrying about boosting service revenue. We wanted all roads to lead to install. That made a big difference.
We work with Stochastic Marketing™ [an SGI Strategic Partner]. We’ve recently been doing $2,900-plus per new customers on average. So, we’re doing a very good job of taking our new opportunities and funneling to installation, which is what the business model is centered around.
One last post-EP question: Did you always have a club membership or maintenance agreement?
John: Yes. We have adjusted the way that we use it right now. For instance, especially in our market, we’re very, very seasonal. We’re super heavy in the fall and pretty heavy in the early summer with big, big downtimes in the opposite seasons. So, we’ve altered how we approach our customers with their maintenance so they understand that we’re doing them during the slow times. There’s been quite a bit of value in doing that for us.
How did your service manager get your techs to understand the importance of turning leads?
John: He implemented a tiered compensation structure where there were fixed amounts of money you’d make for each lead. And then once you reached a certain quantity of leads, it doubled. So, it was mostly a focus and incentive adjustment. We had to direct people’s attention to it, then he gave them some pretty big carrots to chase.
We started to have people separate themselves from the pack, as far as who could flip leads most effectively. It was an organic thing. Our service manager paid attention to who was having success and kept feeding those people additional opportunities. People would notice, “Wow, that guy is killing it.” So, they would naturally want to seek that out for themselves. And some people wouldn’t. Some people are not wired that way, so we fed them different opportunities.
What’s your philosophy on training?
James: I’ve always been very interested in training. We’ve tried all sorts of structured training over the years where you sit in a classroom and you’re talked at. That’s not how most people in our industry learn. These are hands-on individuals and an apprenticeship-style training has been by far the most effective for us. And so, we do a lot of ride-alongs. We are having people see it happen in the real world. Then they imitate it in the real world, get coached on it, and improve. And so that’s really been the system.
A change we made recently that’s been very helpful is we now have a field service manager. Our service manager is not technically trained—he handles administrative, leadership, coaching, and the sales process. Our field service manager is somebody who fills that need and works in the field. For instance, if we have a new technician, he would be riding with the technician and focus on him. Otherwise, he bounces to difficult jobs where people need help, or focuses on one particular technician for a week to help him enhance a certain skillset.
Do you have trainings or meetings where your techs and salespeople can share different techniques or ask for help?
John: Oh, yeah. We don’t call them dedicated meetings or trainings, but we huddle all the time now. And we have a full company meeting at least once a month. We have a departmental meeting at least once a week. Sales department meets once a week. And so, we discuss strategy along those lines. James and I both agree that classroom-based training is not ideal for the development of people. But the SGI sales consultant class, that whole process, the SGI sales process, is worth the price of admission on its own. That has been amazing for us. I tweaked it a little bit to match our own company branding and strengths. And then I have been mentoring people as they come in, but that whole process has been amazing. And whenever we bring a new consultant in, we send them down to that.
What are some things taught in that class that made a big difference to your sales process?
John: Well the fact that it was a process [laughter] was the first big benefit. Before that, we were just sort of winging it. So, the fact that we now had a process was great.
James and I want CM Heating to become the Disney of HVAC. Disney’s prices go up by a multiplier of five times whatever inflation is on any given year—and people pay it. The parks are more crowded than ever. They dominate the box office. People are happy to pay it, probably more so than any other brand in entertainment because they know that they’re going to get really strong value out of it. So, when we were going through the SGI sales process, it is all about building value with the customer. It’s about, “Look, you don’t have to worry about this whole multiple bid process—we’re going to take care of you.” When we started thinking about those things, we were like, “You know what? We could actually deliver these things.” By delivering these things, we would be worth more money. That was really strong for us. Then the closing process that Learning Alliance Estee Jaacovi taught us was exceptionally strong and fit our brand strengths very well.
You’ve been growing quickly. What is your interview process like?
John: The more we refined our recruiting process, the more we’ve realized that hiring a lot of the time is guessing. Finding talented people who produce is difficult. When we put ads out, we do a good initial screening of what a candidate’s experience appears to be. Then, we meet with them and ask ourselves: “Could this person fit at the Disney of HVAC? In an environment where we put culture above all else.” If you fit the culture, we’ll figure out a way to make you work. Once we have satisfied that requirement, we put them in a position that matches their skills and their interests. Then, we groom them. But the initial screening—it’s all based on whether or not a customer would want to hang out with this person.
Will you hire someone after that initial screening?
John: It depends upon the person, but yeah. Depending on the person and the position, we may do multiple interviews, but we’re a growing company and we need the talent. And if we think somebody seems to be a good person from a culture standpoint, we’ll give them the opportunity. If they need some training, and are open to it, we are very willing to invest in them. And you know, if they aren’t who they appeared to be, and they don’t fit our culture, there are other opportunities for them elsewhere.
Are most of your new technicians coming from outside the industry?
John: There’s a fair blend at this point, especially in our install department. One thing that we noticed was when we started focusing on culture and being a super happy place to work, our talent pool had suddenly gotten much, much larger. It used to be so difficult for us to find people. Now we find good people pretty regularly and have enhanced our screening process to pick the cream of the crop, which is an excellent problem to have. But with many of our positions, we’ve had fantastic success, again finding that great personality and then teaching them the skills to be successful in our company.
How do you approach performance management for your team?
John: One of the concepts that we got through SGI is a good little book called, The One Minute Manager. It talks about setting clear expectations and giving immediate feedback. Depending on the department, we have a straightforward compensation structure with a straightforward understanding of why somebody is making what they’re making.
For our install department, we have a program called the D and D program, like Dungeons and Dragons, but instead it’s Daikin® and Ductwork [laughter], which is weird because we don’t sell Daikin® anymore. But anyway, basically every person gets their own character sheet and there’s the list of different skills on it for technical skills and another for soft skills. And people are given a grade between one and five on these things—one basically meaning you can’t do it at all, five meaning you can do it to a point where you could train other people to do it. Everyone is given one of these sheets and evaluated on a regular basis through our project-manager team in the install department. Based on the number of points, you’re given an hourly wage. Your hourly wage doesn’t go down—it only goes up. And if your points dip below a certain point, we put together an action plan to get your performance back up to where you should be.
Install, which drives our economic engine, was historically where we had the hardest time finding and retaining talent. This system has created a ladder where they need to improve to make more money. People are more invested in their own development. We’ve had people completely green who now perform at an excellent level within a year of employment. Before, it took a very long time. We have a similar structure for the service department as well. So, everyone knows exactly where they are—at any given point in time.
How often are techs graded?
John: For the service department, it’s done monthly. For the install department, it’s live. So, the second somebody’s point value becomes worthy of a pay adjustment, it happens. It’s a living, breathing document at any given point in time.
When someone begins regressing, and they’re put on plan, what does that mean?
John: So, the restoration plan is very personal and situation dependent. For example, if someone is struggling because they’re losing sleep because a family member is ill or having an economic challenge, their plan might look much different than if somebody is just having trouble grasping technical concepts. But they’re all managed through regular interactions.
Where did the idea of this form come from?
John: Most people work for a company for six months or a year, and they’ll ask for a raise. It then becomes this weird thing. You’re negotiating against your boss. You end up meeting somewhere in the middle. With our system, we turned the whole personal-development and wage structure into something that was productive for both the company and for the employee. And if an employee was the right guy, they would want to do better. And by doing better, they should earn an appropriate wage for their production. It’s totally merit-based.
That better-performing person is going to turn out a better product for us at a lower time on-site with a lower percentage of call-backs, which will in turn generate higher profit for us. So, we spent a lot of time calculating how we could do forms like this or programs like this for our employees so that everybody wins.
Driving culture is important for you both. How often do you bring the company together for fun engagements?
John: We do formal things at least three times a year and then we do other stuff just when it comes up. But I’d say we do six or seven social functions per year.
In terms of your core values and mission statement, are those big parts of your culture?
John: Oh, yeah, that stuff is shoved down our coworkers’ throats all day long [laughter]. Brandon, the gentleman who took over our service department, he’s one of these guys who’s got the gift for gab. Culture is something he does an excellent job at disseminating in the group. One of my favorite things that he brought to the company is our core value set. It’s very simple: “Do Right. Look Sharp. Be Great.”
We have that everywhere. “Do Right. Look Sharp. Be Great.” If you can just remember those three things, you’ll know what to do in any given situation here.
So, those core values are all over the walls and discussed frequently?
John: Yeah, every meeting, literally all over the walls. Our interconnected Facebook™ group, which we have an internal Facebook™ group where we just sort of socialize when we’re not at work, the name of it is “Do Right. Look Sharp. Be Great!” Yeah, I mean we’ve got it everywhere.
You’re dispatching for profits now. How else has the call center changed the last few years?
John: Number one, again, the right people are incredibly important, especially in the customer-service department. They’re at the top of the funnel. We have a number of very highly rated competitors in our market that do a version of the same thing we do. And so, we need to capture that customer’s attention right away. And so, we hire Disney-caliber personalities who are going to charm the pants off anybody who calls right away. We needed a leader in that department and we were fortunate enough to find somebody named Renee. She actually comes to use via Nordstrom™, which is another company known for their customer service and high quality. Renee worked for us for about a year and a half and was promoted to our call-center manager position. Her influence and example have really set the tone for our crew. It developed the archetype for the type of person we’re looking for.
As you mentioned, we also implemented the SGI processes as far as dispatching for profit, making sure the right people are on the right job, qualifying leads appropriately, so not every lead is created equal in our busy time. We have to prioritize high-value, high-need situations. So that whole qualification process, paired with just getting the right, charming personalities on the phone, has been fantastic for us.
Are you doing Happy Calls after every appointment?
John: We are depending upon the flow. Here’s something worth mentioning. We have a very strong partnership with Make-A-Wish™ of Alaska and Washington. We donate our services as it’s appropriate for certain jobs. Certain people that have mobility issues may wish to have a hot tub installed—we’ll do their electrical work for free. But a game changer for us has been reputation partnership. Anytime we get a review—no matter the rating—we make a donation to Make-A-Wish™. So, we’re the very top-rated HVAC company in Washington state right now because of it. And it’s a win-win-win situation, right? A customer is incentivized in a good way to present their honest feedback, whether it’s good or bad, to us. Most people who have an overwhelmingly positive experience with us, who might not have been inclined to leave a review before, now leave them. And we get to donate to a great cause because of it. We’ve donated 50-grand at this point.
How much money do you donate to Make-A-Wish™ per review?
John: Ten dollars.
Wow. That’s incredible and a great idea.
John: If you want to put in your article, anyone who wants more information on that specifically, I’ve got a nice network of Make-A-Wish™ through the United States and I’d be happy to help someone get started. That’s been a game changer for us.
Who is asking for the review? Your techs at the end of the call?
John: Several points of contact. Our relationship with Make-A-Wish™ is present on our webpage so it’s immediately visible. We present it at the initial call. Our technicians present it at the end of the call. And then we send them a survey via ServiceTitan™ after the call has gone so it eases the process for them to just go on and click.
Have the reviews been the big driver of additional calls you’ve needed to grow?
John: Most of the additional inflow of calls has come by way of our online reputation. We have had a very modest advertising budget. Over the last couple of months, James and I decided to pull the trigger and start advertising. But up until this point, I think we were spending less than two percent of our gross on advertising. But with the reviews being the way they are, and being a very response-driven industry, customers hop online and search for a heating company. CM Heating with 5,000 reviews is much more appealing than someone who has 20. Then, on top of that, our utility programs, like our energy providers, have registered contractor lists, and so we’ve climbed to the top of those lists as well, which generates more trust and more calls that lead to us.
Where do you see the business in 5 to 10 years?
James: We would like to be the dominant, top-of-mind company in our market. We want to be indisputably the choice place for anyone to work. And we want to create an awesome environment and family where people want to be part of that and seek us out. And we have too many people trying to get in the door here, and customers who are seeking us out for who we are, not just what we do.
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