Do the Right Thing - 2009 CONTRACTOR of the YEAR

John Ward was broke in 1992, and then he met Frank Blau. Ward took Blau's flat rate gospel to heart and he has turned Applewood Plumbing, Heating & Electric into one of the most profitable and philanthropically minded contractors in the country. The accolades have been pouring in. Applewood was recently honored as the 2009 Large Business winner in the Denver Better Business Bureau Torch Award for Marketplace Trust. It gives away $1,000 a month to small local charities. Ward is one of the founders of the Nexstar Network Legacy Foundation, which gives scholarships to students who want to pursue a career in the plumbing-heating-cooling or electrical trades.

For that and all of the many reasons that follow, John Ward and his team at Applewood Plumbing, Heating & Electric are CONTRACTOR's 2009 Contractor of the Year.

When Blau and his compatriots Mike Diamond and George Brazil founded Contractors 2000 (now Nexstar Network) in the early 1990s, Applewood was member number 15. The company was recently ranked eighth of more than 300 service companies and received the Nexstar Network Select Service Award of Excellence, which is based upon customer, employee and financial success. This is the seventh year in a row Applewood has received the esteemed designation. Applewood is also the 2007 Golden Rotary's Ethics in Business Award winner and the 2008 Best of Boulder Award in the Plumbing Contractors category by the U.S. Local Business Association. The Public Relations Society of America named Ward as its 2008 Businessperson of the Year.

Blau, Blau Plumbing, Milwaukee, and the nation's foremost popularizer of flat rate pricing, told CONTRACTOR that if a contractor is going to devote his life to this industry and if he expects his employees to devote 20 or 30 years to his company, he has “a moral obligation to [him]self and to [his] associates to become wealthy,” so that he can take care of his family, his employees and the community he serves.

Serve it he does. Ward's first act of charity was providing T-shirts for the Belmar Elementary Science Fair, and it snowballed form there. He has formalized the process so that he gives away $1,000 a month to small, local charities. Years ago he was pressured to give money to a national mega-charity at the same time the group was paying huge salaries to its executives, and he believes small local charities do more good.

Applewood's “Caring Community 12 in 12 Giveaway” program typifies its community spirit. Local nonprofits receive $1,000 monthly to support programs, community projects and educational activities. Applewood also supports the Wheat Ridge Farmer 5000, the Denver Old Home Fair, and it still provides T-shirts for the Belmar Elementary Science Fair.

“We saw the impact that a relatively small amount of money could have on these organizations,” says John's son, Vice President Josh Ward.

Blau says Ward is quick to write a check whenever a charity needs money.

“John Ward is in my special circle of friends,” Blau says.

How did he get here?

John was 16-years-old and living in Broomfield, Colo., when he watched a plumber install a dishwasher and garbage disposer in his parents' house. It seemed like a good way to earn a living, so he went to work for that plumber, Paul Starkey. When he went away to college, he worked for another plumber, Don Winters, in Gunnison, Colo.

Ward planned to become a teacher, majoring in English and journalism with a minor in elementary education, but he was drafted out of college. After working as an evidence custodian for the Army's criminal investigation division, Ward went back to working for a plumbing contractor, got married and had kids. He also started a long-term part-time job teaching plumbing at Red Rocks Community College, where he eventually ran the plumbing department.

In 1973, Ward became a reluctant entrepreneur when the plumber he was working for went bankrupt. The guy couldn't even pay him, but he did give him a Milwaukee Electric Tool Sawzall and a Hole Hawg. What followed was nearly 20 years of plumbing by day and teaching at night, sometimes teaching in the morning and then plumbing in the afternoon. Depending on how much new construction work he could find, some years he might make more money plumbing than teaching or vice versa.

They were tough years: “We were lucky to make payroll,” John recalls. His wife, Cathie, holds a master's degree in social work and worked at a battered women's shelter and in child protective services, a vocation at which nobody gets rich.

Then he hit bottom. Ward was working at a ski lodge project where the developer's business plan seemed to include not paying the subs. The developer went bankrupt, leaving Ward $56,000 in debt to his suppliers. He had 18 employees and had to lay them all off. Son Josh came home from Colorado Mountain College in Glenwood Springs after two semesters. The company was John, Josh and one other plumber who had worked for John, a customer list with 500 names on it, no business and thousands in debt.

He got religion

“A lot of times, these guys have to be on their knees and have a Come-to-Jesus moment where they are willing to admit to themselves, ‘what I've been doing hasn't been working,” says George Brazil. John Ward had his moment and Frank Blau walked in. Blau says he taught Ward at seminars in Colorado Springs and in Denver, in addition to meeting with him individually.

Ward took everything that Blau taught him and ran with it. “He knows his numbers right to the T and that makes me very happy,” Blau says.

The key for Ward, Brazil notes, is that he actually did what he was told to do.

“My influence was indirect through the programs and things that I and Frank Blau concocted,” Brazil says. “[Ward] grabbed hold of them and implemented them. The key word is that he implemented them. You can tell people what to do until you're blue in the face, but they don't implement them. He's a success story. He certainly has stood out in the overall scheme of things.”

The company was all service and no more new construction. Josh started entering the customer list into a personal computer that probably had as much memory as a calculator does today. He created direct mail pieces and Yellow Page ads and did the dispatching with sticky notes. They painted the first truck the now familiar orange. They paid $500 a month to the wholesaler to whom they owed $56,000. They joined Contractors 2000. The first year with John and another plumber they billed $300,000, and when Josh predicted that they could top $1 million, it was treated as a joke. When they topped $1 million a few years later, they were growing by 20%-30% a year.

In the midst of The Great Recession, Applewood will grow 15% this year and bill $12.5 million, Josh says. That's down from 2008's growth rate of 43%, but the budget for 2010 calls for $15 million.

They used to track monthly sales by the thousands of dollars, Josh notes, until January 2008 when they topped $1 million for the first time.

It's easier to be a cop

Turnover? Forget about it. It's tougher to get a job at Applewood than it is to get a job with the police department. When John Ward was asked if the recession offered a deeper talent pool, his answer was, “Not really.”

The contractor's background checks are so stringent that 90% of applicants won't get an interview with Service Manager Mike Taylor. And only one out of 10 of those will get a job offer. The contractor only hires licensed journeymen or master plumbers, and electricians and HVAC techs need to be certified by North American Technician Excellence in order to make any real money. After a plumber has been with Applewood for about a year, he can expect to make an average of $85,000, including his base salary and commissions. Benefits are on top of that.

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It gets better. Applewood offers a 401K with a company match up to 50%, or 3% if an employee puts away 6%. Applewood also pays 100% of the medical insurance premiums for an employee and his family. They contract with AFLAC for optional insurance products that employees can buy, says Accounting and Human Resource Manager Marc Filas. The company also pays for financial advisors to help employees make their 401K selections, he says.

John Ward's social conscience has been honed by years of talking with Cathie around the dinner table, hearing about the less fortunate who really need some help. His attitude about employees was formed through bad experiences working for other people and by performing plumbing at Coors. Coors employees, who Ward says spent most of their day watching beer bottles roll past on the bottling line, lived in three bedroom houses, drove nice cars, and sent their kids to college. Ward was protecting the health of the nation, and he was broke. He didn't even have a garage.

Today, Ward notes, his accountant may be well compensated, but he doesn't make as much as the average Applewood plumber or electrician.

“The field staff earns the money and makes the profit,” Ward points out.

The quality of Applewood's employees is astounding. Warehouse Manager and Safety Officer Russ Smith was himself a successful Boca Raton, Fla., plumbing contractor and Blau disciple. Why is he here? Smith points to his computer screen wallpaper, a photo of his grandchildren, who live in Denver. When it became apparent that the grandkids weren't leaving Denver, Smith and his wife, herself a plumber's daughter, sold the business and moved to Colorado.

“It's extremely difficult to find another company that reflects the same integrity as you have,” Smith says.

The company only hires licensed mechanics, says Taylor, because it wouldn't be fair to the licensed people to have them work with, or make the same money as, someone who isn't licensed. HVAC technicians, for whom licensing is not required in all jurisdictions, will make more money if they get licensed and NATE certified.

Taylor and John Ward have known each other since sixth grade.

“This is our life,” Taylor says. “You have to live your personal life and your professional life the same way and treat your employees the same. If you make that investment in your community, everything comes back to you. It's like karma.”

Taylor points out that Applewood has a formal ethics in business training program on DVD that all employees take.

A journeyman plumber with a two year license earns a base rate of $20 per hour. A licensed master plumber makes $25 per hour and earns commissions on sales at a rate of 17.61%. Employees who are really good salespeople can get up to 4% more if they sell more.

All of the employees will get paid for 40 hours of work if they are on the premises, even if they don't have a service call to go to. Service techs have to bill $156 per hour when they're on the clock before they are eligible for commissions. The techs are aided by sales training from Nexstar Network and The Contractor's Friend DVDs by Matt Smith Media Inc.

“A lot of them are really good at it,” Taylor says. “That comes from hiring good people. It's a matter of offering honest options to people and good customer service that makes people want to buy. You look at the whole house and find other issues or developing issues. Just fixing the problem at hand is not good customer service if something else breaks next week. We give them options for either repair or replacement.”

Taylor estimates that his service techs have a closing ratio of 65%-70% because of their credibility.

Office pros

Applewood customer service representatives and dispatchers make more money than their counterparts elsewhere, and they're worth it.

“My experience is in running call centers, and in that industry the acceptable rate is 5% abandoned calls and 5% going into the queue,” says Manager of Customer Service Anna Sullivan. “Josh wants 100%.”

Sullivan's crew gets close to that. On November 18 the contractor received 260 calls and only two went to voice mail. Someone is answering the phone live Monday through Friday from 6:00 a.m. until 10:00 p.m. Dispatchers likewise work staggered shifts from 6:00 a.m. until 10:00 p.m.

Sullivan credits her team's success to some really good scripting developed by Taylor and Josh Ward. She did a manual count over a two week period where she separated out the calls for service from all the other phone calls and estimates that her CSRs have a conversion ratio of 80%.

“The goal is to schedule a technician so that they can get face to face with a customer so the customer can see our level of quality,” Sullivan says.

The customer can see the phenomenal technicians before they even show up at the house because the dispatchers will send the customer an e-mail introducing the technician. The e-mail includes a photo, license number and some personal information about the tech to make the customer feel comfortable.

“The technician e-mail is a trust builder,” says Marketing Director Paula Washenberger. “People are having an emergency, and they're frightened or overwhelmed. This makes them feel safe.”

The contractor has also reworked the technicians' badges to include a copy of their individual license on the back of the badge.

Your home is your safe place, John Ward says. When a customer calls Applewood, she has to know that she will get a drug-free, clean-cut technician who will respect her home.

Applewood's success can be traced to Ward and the firm's business philosophy: Better. Cleaner. Faster. Applewood's motto is, “We never lie, cheat or defraud our customers, our company or ourselves.”

“In an industry that fights its integrity daily, we are proud that we deserve — and receive — our customers' trust each time we enter their homes,” Ward says. “It never hurts a business to operate with honesty and integrity, no matter what you do.”

Amen to that. Browse through www.Applewoodfixit.com and get a taste of how a great contracting firm operates.

APPLEWOOD'S CODE OF ETHICS

CUSTOMERS

We will serve our customers with integrity, competence and objectivity.

We will deliver to our customers more than we promised through value added services.

We will perform our work to meet technical codes or better.

We will explore each customer situation in sufficient detail and gather sufficient facts to gain an understanding of the problem, the scope of assistance needed, and the possible benefits our service and technical recommendations may provide our customers.

We will respect each customer's home and property and leave them as clean as we found them.

EMPLOYEES

We will treat our employees fairly.

We will assign technical and support personnel to each job in accord with their experience, knowledge and expertise.

We will foster training for all our employees on an on-going basis to improve and uphold high performance standards.

We will hire only personnel of high personal integrity.

PROFESSIONAL RESPONSIBILITY

We will perform jobs for which we are qualified by our experience and technical competence.

We will make quality service the trademark of the jobs we perform.

We will stand behind our work. If needed, we will take care of callbacks with a minimum of inconvenience to our customers.

We will not provide services to a customer under terms or conditions that might damage or compromise the integrity of our trade and profession. We follow the golden rule.

We will not advertise our services in a deceptive manner.

We will maintain a wholly professional attitude and behavior toward those we serve, our fellow contractors, our own employees, our suppliers and the public at large.

EARNINGS

We will agree with our customers independently and in advance on the basis for our fees. They will be reasonable, legitimate and commensurate with the quality or services we deliver and the responsibility we accept.

We will make it our moral imperative to maintain a profitable business as part of our responsibility to our employees and our families.

We will listen to customer complaints about price, mindful of the honest value received by the customer and our right to an ethical profit.

SOCIAL RESPONSIBILITY

We will be good corporate citizens.

We will protect the health and safety of our communities by sharing knowledge of new environmental developments and technological advancements with the communities we serve.

We will contribute money, time and labor to charitable causes.