Heating and air conditioning firm building on 78 year legacy

FDR was re-elected in a landslide. Gone with the Wind first hit the bookstores. And the cost to mail a letter was three cents. It was 1936, the year McCrea Equipment Company was founded.

To place that success in perspective, the average lifespan of leading U.S. companies has decreased from 67 years in the 1920s to just 15 years today. The Fauquier County firm is bucking the trend by building business the “McCrea Way. Quality service the first time, every time”.

“Mack” McCrea created the then heating and air conditioning wholesaler in the harsh economic environment of the mid-1930s, when unemployment raged at 16.9%; over twice what the US is experiencing today. When he died in 1965, three of his employees purchased the company’s stock.

One of those employees was George Lanhardt, who subsequently bought out the other partners in the early 80s. Since then, it’s been a family run business with Lanhardt’s son, Wayne, forging the company’s growth for nearly three decades.

Today, the firm has 215 employees—63 at the Warrenton location—and operates six companies in VA, MD, and PA. Wayne Lanhardt’s sons, Shane and Seth, are the firm’s next generation of leaders who are continuing the company’s performance by building a young, success-driven corps of managers. Their accomplishment is reflected in increased revenues generated during a depressed economy.

“We have a very strong team with a lot of guys in their 30s and 40s in management positions. The team is very forward thinking. We’ve made a successful transition from an older company. A lot of older companies stumble. In the end, it’s really about your people. That’s the strength of our organization,” says 36-year-old Shane Lanhardt, who runs the Virginia business and spent time sharing the firm’s story with the Piedmont Business Journal.

Unique business plan
Unlike many HVAC businesses, McCrea sets itself apart by being involved in all aspects of heating and air conditioning services. This includes new home installations, service and replacement, manufacturing of sheet metal, duct and piping materials, and providing energy analysis and audits. The firm is among the largest HVAC firms in the DC metro area.

In addition to the scope of the business enterprises, the firm had the prescient to see what was unfolding in the red-hot real estate market of a decade ago. “The housing market was booming during the nineties. It was almost uncontrollable growth. We were installing 10,000 units a year in new homes. But we knew the bubble was going to have to burst,” recalls Lanhardt.

And burst it did. But McCrea had positioned itself to survive the collapse. “We decided to create service and replacement companies and augment new home construction sales with more service and replacement work. In 2000, 95% of our business was in new home construction. Last year, that figure dropped to 60% with 40% service and replacement picking up the difference.”

Lanhardt goes on to say, “The housing market has recovered some but I don’t think we’ll ever see what it was doing back in the nineties. While we have done 40% more new work this year than last, I don’t think that pace will continue.”

The DC metro real estate market is among the most stable in the Nation but Lanhardt opines there is still “a lot of instability in the market. If you know your job is stable, then a decision to replace a $6,000 unit becomes easier. If not, you might pay $500 for a repair. There is a little trend of more people repairing and not buying the best systems because of instability,” Lanhartdt says.

One of the hallmarks of McCrea is not trying to sell customers something they don’t need or can’t afford. The business is based on volume sales and “we don’t want to make the most amount of money off each customer. Our philosophy is to provide good service, do a great job and provide value to people for their money,” emphasizes Lanhardt.

Building market share
One obvious advantage of building sales with a decades old business is a large customer base to draw upon. The firm has a 200,000 person customer file that receives a quarterly newsletter providing information on new developments in the industry, tips on reducing heating and cooling costs, special promotional offerings on service and installations and more.

“We keep in touch with our customers through our newsletter, Facebook and Twitter. Our industry is reactive so customers don’t normally plan to buy new. Their purchase is often dictated by the immediate need of a failed unit. Building brand so that former customers think of McCrea when facing an HVAC need is critical. There is no cold calling in this business. Word of mouth and branding are important,” says Lanhardt.

As in every industry, technological advancements have been dramatic in the last few decades. Today, an increasing source of new business is geothermal. It provides the highest energy efficiency but is expensive.

Lanhardt says, “The federal government gives a 30% tax credit back to dollar one on the installation costs on these systems. And there is no cap on that number. It is the most efficient unit you can buy. A geothermal unit can reduce utility costs by 70% to 80% a year.”

Significant savings are not limited to premier systems such as geothermal. Propane or oil systems that are upgraded to heat pumps with oil backup can generate 50% to 60% savings in utility costs from systems installed just a decade ago. Science and technology strikes again.

Nonetheless, technical advancements can possibly be trumped by commonsense. Lanhardt underscores old fashioned strategies such as raising window shades and pulling curtains back during the winter months will allow solar energy to hold heating costs down. Reverse actions in the summer permits a darken house to retain air conditioned cool air.

“Our newsletter regularly includes cost saving recommendations,” says Lanhardt.

Community involvement
The importance of giving back to the community that helped fuel its growth is evident in McCrea’s work with Fauquier Habitat for Humanity. Last January, the firm provided discounted HVAC units and no cost installation for two duplexes Habitat built.

The duplexes are a collective effort between Habitat and the Fauquier Family Shelter. The Shelter provides transitional housing for families in need. If they subsequently qualify, they are eligible in securing mortgages as permanent residents of the newly constructed duplexes.

Brenda Drerenberger, Executive Director of Fauquier Habit for Humanity, explains, “Shane is great to work with. He arranged for the manufacturer, Trane, to provide the deeply discounted units to Habitat and then donated McCrea’s labor costs to install them.

“The program is a hand up not a hand out. Each family must be employed and quality for a mortgage. They are also required to provide 400 hours of sweat equity. The program gives them an opportunity to step up in life and improve their future possibilities. But the lower we can keep construction costs the lower the family’s mortgage.”

Habitat has 200 volunteers that provide much of the construction labor but, by law, cannot install heating and air conditioning units. McCrea fulfills that need.

“I went to them this year and was not expecting them to be able to help again but they did,” says Drerenberger.

The firm also supports Habitat’s annual golf tournament and other Habitat projects in Virginia.

Given the business and community philosophy that drives McCrea Heating and Air conditioning, celebrating 100 years in business appears to be just a matter of time—2036 to be exact.

Published in the Winter 2014 edition of the Piedmont Business Journal.