HVAC Business Best Practices Series (Podcast)
The week of 3/5/2017 was “Business week” on the HVAC school podcast and we talked about a full range of business topics. Here are our business-related episodes.
Why Maintenance Agreements Matter and How to Make Them Work w/ Ruth King
In this episode, Ruth King shares some of her top insights on how to create a maintenance program if you don't have one. She teaches us to recognize a broken program and fix it.
The maintenance component of your company will be the part of your business that allows you to grow your business profitably. If you don't believe in maintenance agreements, your customers won't believe in those maintenance agreements either. Without maintenance agreements, your company will have sharply different slower times and busier times. You'll likely have to pay employees to stay in slow times, and it is not very profitable.
Getting a maintenance agreement plan in motion is as easy as getting a maintenance agreement form. Inform your customers of the benefits of maintenance (saving money on utility bills, extending equipment life, etc.). Then, offer it to your customers; you don't even have to make it sound like a sales pitch. Some of your existing customers will almost surely agree to the maintenance agreement.
When you enroll someone in a maintenance agreement, it is a good idea to put that money in a separate savings account. The cost of performing the maintenance can be taken out of that savings account, but you would have ideally already set some money aside solely for operation costs. To make sure you're at least breaking even on your maintenance agreements, you must make sure you factor in hourly pay, cost of goods sold, and overhead costs. You can calculate overhead costs by checking the previous year's operating expenses and dividing that by your billable hours.
If you are interested in Ruth's maintenance program course, you can find out more HERE. Be sure to use the offer code HVACRS (with all caps) to get a 10% discount on all her products.
Should I Start My Own Business? (and other solid advice) w/ Tersh Blissette
Tersh and Bryan were both techs working for other companies when they started their own businesses. This episode is a look back at what they got right, what they got wrong, and the top things that have worked over the years.
In general, there are two types of HVAC business owners: the sales/business type and the technical type. Bryan and Tersh are both of the technical variety. These types of owners may be less familiar with the ownership and business organization side. Many current technicians will find themselves in a similar position if they decide to go into business.
The HVAC industry is NOT as profitable as many people imagine it to be, especially in the early years. Tersh recommends that technicians really research the expenses of HVAC business ownership, namely worker's compensation, general liability, licensing, fuel expenses, and advertising. He also recommends that business owners use digital media to assist their business operations.
Bryan encourages prospective business owners focus on their financial literacy. You can be excellent with customer service and can draw many customers to your business, but those qualities don't matter if you can't manage your money effectively. Business owners need to understand what profit REALLY is, how margins work, and how to evaluate and nurture a successful business model. Also, business owners should track labor rates and know who to compete with; don't compete with businesses that do bad work or are going out of business.
You must also have good people skills if you want to start an HVAC business. If you cannot be empathetic and build relationships, running an HVAC business isn't for you. Bryan and Tersh both agree that the best overall mindset for an HVAC company's business model is “People over profit.” That includes service technicians, customers, and all staff.
Profitability and Money Leaks in HVAC w/ Ruth King
In this episode, Ruth breaks down some of the main things an A/C contractor needs to consider when looking at their numbers and some of the major leaks that can lead to unprofitability.
Profit and loss (P&L) statements are critical for determining the profitability of your business. You can use it to find money “leaks” in your business model. When making P&L statements, ensure that the revenue AND costs for a given product are in the same month for best accuracy.
Most small businesses don't look at their profit and loss statements at least monthly, which is the best practice for keeping track of money via a P&L statement. Most businesses also don't separate overhead from cost of goods sold. Overhead costs don't DIRECTLY contribute to the business's revenue. Examples of overhead include rent, electricity bills, and office staff paychecks. Some other common profit drains include marketing and insurance expenses. However, perhaps the largest potential money drain is a lack of employee productivity. A vast majority of small business employees “steal” from their employers by using work time for personal activities.
You also want to run your business on an accrual basis than a cash basis. You can keep better track of your expenses and income automatically, not ONLY when you pay your expenses or when money comes in through the door. QuickBooks makes this an easy process.
You know that your business is profitable if your P&L statements end up with a positive number. On top of that, you can determine your net profit per hour. Take your net profit and divide it by billable hours (no vacation time, office staff wages, etc.).
You can see all of Ruth's content and courses HERE. Make sure to use the offer code HVACRS with all caps for a great discount.
Creating a Business That People Want to Work for w/ Bob Gee
This is an older episode, but it contains great principles for leading an HVAC business and some really good sales practices.
Bob has watched sales and leadership evolve a lot over the years. Today, success in sales depends on your abilities to build relationships with the customers. You're no longer “selling” things; you are “helping people buy” things. Instead of pushing products to people, it's best to “ask your way into a sale” and prioritize a customer's wants and needs. There is also a stark difference between management and leadership. A leader is people-oriented and customer-oriented; they care about the human element of business, not just crunching numbers.
When it comes to building a company culture, the company leaders have to be the ones to create the team. You have to get the right people on board and delegate them in a way that maximizes those people's potential. Business leaders also need to examine their own purpose. Why are they running the business? Do they want to commit to the business, or did they just decide to work independently to have more control over their own schedule? Motives mean a lot, and the managers' attitudes trickle down.
Firing people and having people leave are unfortunate but inevitable parts of running your own business. People tend to leave people; they don't necessarily leave the business because of the money or the type of work. Employees have to be on board with the managers' ideas of what the company is doing and where it should go. If they are not on board, they will quit or may have to be let go after their work quality slips over time.