By Barry Burnett
Change is constant. We’ve all heard that one before. For many of us, we’ve heard the words so many times they’ve lost their effect.
Don’t let this happen to you! Change is constant, and there are DRAMATIC changes happening in our industry right now.
We must refocus the future in the face of all the changes that are coming our way in order to succeed. To achieve your vision of the future, there are five things you must do:
1. Manage and leverage your labor force. Labor is a scarce and diminishing resource. Many of our best workers are reaching retirement age, and there are not enough new workers to replace them. According to the Bureau of Labor Statistics, the median age of the labor force will approach 41 years old in 2008, and by 2016 the blue collar workforce is projected to shrink by as much as 50%, according to the Department of Labor and Industries.
In addition, the pool of eligible workers we have to choose from is changing. The growth rate of minorities participating in the labor force is projected to increase dramatically in the next few years.
For us to succeed, we must do more to attract young people, of all backgrounds, to our industry. Here’s an equation to remember:
Growing demand for labor + shrinking labor pool + 80% of all equipment is retail = we need high-end retail installers.
Not only do we need to attract more workers, but we must have an outstanding training program, complete with procedures and processes, to develop them into high-end retail installers.
2. Avoid the top three profit killers: pricing, maintenance, and call backs. Consider this: a) The average company loses 5-10% of its net on pricing omissions. Not long ago I visited a dealer who was missing $2,182 in billing on each job. This company did 72 jobs in a month, which means they were losing $157,104 in billing each month!
b) The majority of companies have service departments that lose money, primarily due to huge losses on maintenance agreements. With our lack of qualified labor, we can no longer afford to do any business function that we don’t make a profit on.
c) Call backs cost companies more lost profit than any other business function. The average cost of a lost hour is $425. It’s even more if you’re selling high-efficiency equipment.
What does it all mean? With our labor force diminishing, we simply can’t do any business function that we don’t make a profit on. Check to make sure your pricing is accurate and complete, make sure your maintenance agreements are priced so you can make money, and build a network of procedures and processes that will give your employees the tools they need to avoid call backs.
3. Become an HVAC retailer. Since 1970, our industry has changed from being new construction-based to being replacement-based. Trane projects that the HVAC market, by 2010, will be 85% replacement. Each of us must build a sales-driven company in order to compete in today’s changing market. We must become HVAC retailers!
Today, our customers demand more from us than ever before. One way to meet this challenge is to develop points of value to communicate your installation processes to your customers. If customers don’t understand that you have an installation manual and processes and procedures that allow you to do high-quality installations, they cannot assign a value to it that will support your price.
Residential customers are also becoming increasingly conscious about the environment and their energy usage.
A recent survey stated that 68% of households in the U.S. are aware of the Energy Star label. In some major markets, awareness is even greater, averaging 76%. By bringing in third party collateral from Energy Star and other sources, such as Consumer Reports, about the benefits of high-efficiency equipment into your sales process, you will give your customers another reason to trust you with their business.
You must also provide your sales team with the technology they need to succeed in today’s new retail environment.
Did you know 85% of homeowners have access to personal computers, but only 2% of dealers use laptops in their sales presentations?
How much of a difference can a computerized, in-home selling process make?
Shawn Kukowski of Desert Suns Heating & Cooling in Albuquerque, NM, has increased his gross revenue by 11.8% and his net profits by 248% in just one year since he implemented a computerized in-home selling system.
We must continue to adjust to match the retailization shift that is taking place in our market by matching the technology to that which residential customers are accustomed.
4. Structure and plan for profitable growth. Structure and business planning are the steps to profitable growth. Build an organizational chart for your business now, and for the business you want to have five years from now.
This will be your blue print for structure and growth. In addition to an organization chart, you must also complete an annual business plan. Would you take a driving vacation without a road map? Of course not! You wouldn’t know where you were going. A business plan is your road map for running your business. Create a business plan for your company this year.
5. Stay profitable. Profit is the fuel for change and profitable growth. All of us must raise our profits, lower our labor, and lower our overhead. The secret is to do more revenue with the same number of people. The way to do this is to focus on the type of jobs that you do.
The right jobs are the ones that include high-efficiency equipment. In today’s climate of rising energy costs, offering anything less than the best and highest-efficiency equipment would be a disservice to your customers. By doing better jobs than you do now, you will be able to make more profits than you do now, which will allow you to hire and retain the scarce labor resources and to MAKE MORE MONEY than you do now!
Now is the time to refocus yourself, change to a retail mindset, make the necessary technology changes, and create a sales-driven company. Don’t wait, start now!
|Barry Burnett is partner at Business Development Resources and a past CB Contractor of the Year winner as founder of B&B Heating and Air Conditioning, Redmond, WA. To reach him, visit www.bdrco.com or e-mail [email protected]|