How to Swiftly Destroy an HVAC Dealership: Part 1

Sink a dealership in no time at all? Unfortunately, it’s easy to do and it happens to an estimated 30% of all HVAC dealerships by their second year. Even the most ambitious, well-intentioned individual can tank an HVAC dealership by not adhering to these three proven and basic business fundamentals:

1.)  Define and adhere to a differentiated Mission and Vision.
2.) Describe and live a set of strong Core Values.
3.) Develop and follow a well-defined Business Strategy.

Ignore these fundamentals, and you will likely be successful at destroying your dealership in less than 24 months.

Mission and Vision

If these fundamentals sound cliché, it’s because cliché’s are built on truths. Let’s take them one at a time, starting with a differentiated Mission and Vision. A Mission is “the purpose of an organization.” It is why the company exists; its reason for being. The more unique and ownable a Mission, the better. As long as it creates value and solves customers’ problems.

If we asked the owner of Dealership A to describe their company Mission, it would raise a red flag if the answer was simply, “We fix broken HVACs.”

A more powerful and sustainable mission might be that of Dealership B: “We are a service business that helps our customers achieve a healthier, more comfortable indoor environment while reducing their lifetime energy consumption.” This Mission has purpose, is differentiated, and creates greater value for the customer.

The Core Values of a company should be embraced and conveyed by leadership and all company employees. If people within the organization do not align with or believe in the Values, you either have the wrong people or the wrong Mission, Vision and Core Values for your dealership. In most cases, companies that fail either have no defined Values or their Values are contrary to their Mission, Vision and Strategy. Examples of “poor” Values for the HVAC industry might include things like, “Profit over quality,” “OK is good enough,” and “Fast and cheap.”

Having the Mission, Vision, and Core Values defined and locked will only deliver success when they are baked into a robust and well-executed Business Strategy. A Business Strategy is essentially a long-term business plan. It defines the goals, tactics, and metrics for the business over a 3–5-year horizon. In order for Dealership B to achieve their Mission and Vision, they would need a detailed strategy that succinctly outlines how they will get there. The Strategy must explain how specifically Dealership B will “help our customers achieve a healthier, more comfortable indoor environment while reducing their lifetime energy consumption” and what they will do to “improve the quality of homeowner’s lives through the application of advanced HVAC and IAQ technologies.”

The strategy must describe what will be done to make it all come together in order to achieve business success. The best place to start when developing a Business Strategy is to ask and answer critical business questions: What are the key performance metrics (topline growth, EBIT targets, market share growth, inventory turns, customer satisfaction level, etc.)?, Are the talent, capabilities, and organizational structure appropriate to achieve the stated business goals? Is the business aligned with the right manufacturing and distribution partners? Will growth be driven by expanding the market or growing market share?, How is the target customer segment(s) defined?, How will the business be branded and marketed?, Will the company remain independent or sell to a larger entity? The last question is risky because it often takes over the focus of the business and detracts from delivering on the Mission, Vision, Values, and broader Strategy. If selling is a long-term goal, it is best to just run a successful business and the rest will happen on its own.

For illustration, let’s compare Dealership A and Dealership B on Business Strategy. If Dealership A’s Mission is simply to “Fix broken HVACs” and their Core Values are “Profit over quality,” “OK is good enough,” “Fast and cheap,” then their Strategy would probably be quite simple, although unlikely to be formally defined or documented. It might be boiled down to something like: “Over the next 3-5 years, we will keep whatever employees we can and just hire replacements as they leave. We will  keep business to a level that we can manage so we don’t need to invest in more resources. We will get to customers when we can based on our work load and we won’t upsell or cross-sell because that takes too much time and a lot of convincing. We will measure our success by making sure we get through each quarter with as few customer complaints as possible.”

A real-life example of a “Dealership A” recently played out with my neighbor in Florida. After a lot of research, he was certain he wanted a heat pump to replace his aging and inefficient HVAC system. When the installer showed up, the first thing he asked my neighbor was, “how often do you actually need heat and do you really want to pay all that extra money for a heat pump that you might not use very much.” So, my neighbor concurred and ended up with a new air conditioning system with base efficiency and a fan coil with heat strips rather than a heat pump system. The dealership missed an opportunity to upsell and to define their company as selling efficient, innovative solutions. Not a recipe for success in a crowded and highly competitive market.

To the contrary, Dealership B’s Strategy would likely be more thoughtful, detailed and focused on how they will deliver their Mission and Vision over time. It would explain how they will measure their business performance and growth to ensure they meet their stated goals, it would describe which manufacturing and distribution partners will deliver the product innovations and support programs their customers need, it would explain how they will find and retain the talent required to sell, install, and manage integrated solutions, and it would discuss how they will brand and market their business. The strategy would also include a detailed financial budget and sales forecast.

Rest assured, a real-life Dealership B would have upsold my neighbor to a two-speed or multi-speed high-efficiency heat pump because it would provide greater energy efficiency, it would provide greater business profit, it would align with their overall Strategy, and most importantly, it would deliver what the customer requested: A better solution to improve home comfort and energy efficiency resulting in lower utility bills.

In summary, it’s easy to destroy an HVAC dealership. Throw discipline to the wind and don’t adhere to the three business fundamentals. If you want success, 1.)  Define your company’s Mission and Vision, 2.) Make your Core Values clear, and 3.) Develop a succinct Business Strategy. The rest comes from strong leadership, a talented and engaged team, a lot of hard work, and loving what you do.