Our industry reminds me of a small boat at high seas, bobbing up and down with every seasonal cycle and weather hiccup. Many contractors are in constant fear the perfect storm will hit and wipe out their businesses for good.
For some, that perfect storm was the recent combination of a major several-year economic downturn, coupled with one of the mildest winters on record. Many have been right on the brink, and some have gone under in just the past year. After 25 years in the HVAC industry, I’m still amazed at how we are so weather dependent.
Of course there’s no perfect solution to completely wipe out the seasonality of our business. Weather will always impact demand. You need another way to drive demand your way year-round.
Step one begins with making the decision to be in a different market than your weather-dependent comrades. For this to happen, your business model mustn’t be structured around feast-and-famine results from weather-based knee-jerk reaction price shoppers.
For years, our industry’s best teachers, consultants and coaches, many former contractors themselves, have been preaching the importance of leveling these dangerous cycles – all with a similar message: sell maintenance agreements (http://bit.ly/SA_5NewWays).
Maintenance agreements are the life-blood of virtually every successful service company (http://bit.ly/KCBvQY). They’re one of the best tools available to help create a more stable base of business. They will help you grow your company, stabilize weather-related swings, and lead to higher profitability IF, and only IF, you have solid systems in place to plant the seeds for, and harvest additional work from this private field of customers (http://bit.ly/SA_Opportunity).
How do you do this? By continually offering value, and ways to improve their comfort, health, safety, and economic well-being (http://bit.ly/SAValue). It starts with your very first visit. Whether your technician is on a demand-service call or a tune-up, he or she performs a thorough assessment of your service customer’s home and HVAC system.
During annual inspections and tune-ups, your technicians must go far beyond the boxes in the basement or attic, or the ones sitting outside, and take an inventory of everything your company can improve in your customer’s home.
This means a combination of visual inspection and testing of the home’s envelope and HVAC system, including ductwork, grilles, registers, and of course equipment (http://bit.ly/SA_RT). Now I could go on for pages on where to test and how to test, what to look at, etc., but they’re plenty of great articles in the pages of this magazine that go into that level of detail. The point is your agreement customers are where you can start to create work that’s much less weather dependent.
How many agreements should you have? The National Comfort Institute (www.ncihvac.com) model is to maintain a minimum of 500-600 agreement customers for every $500,000 in total annual sales. Many top companies have blown this away with over 5,000 agreements on $2 million in sales (That’s 1,250 agreements for every $500,000).
Large service agreement bases don’t happen by accident. They start with carefully laid marketing plans with the purpose of getting in the door through service or a tune-up (http://bit.ly/SA_NewDimension). Many contractors already do this, right? So what’s the big deal?
The reality is most technicians perform the tune-up, collect the money, and move on to the next customer. They don’t have a repeatable system to help generate interest in a maintenance agreement, offer options, and get a signed agreement. Most companies do not train their technicians to understand the reason you are offering the tune-up in the first place is to lock in a long-term customer with a maintenance agreement. Most technicians are never trained on how to show the customer the value of the agreement. And most are poorly compensated for it, if at all.
Building a maintenance agreement business can’t be an after-thought, or put on auto pilot. The most successful companies have a service manager who’s more of a manager and less of a lead technician. He or she should be measured and compensated by how many agreements are sold each month, and your retention rate, especially after the first year. This individual is critical to your success. But he can’t do it on his own. He needs constant training and good marketing support, as do your technicians.
When done right, your HVAC replacement, renovation, and home performance business will flourish, reducing your dependency on weather, and leveling your business for long term success and profitability.
Dominick Guarino is Chairman & CEO of National Comfort Institute (NCI), (www.nationalcomfortinstitute.com), a national training and membership organization focused on helping contractors grow and become more profitable. Email him at [email protected] or call NCI at 800/633-7058.