Twelve Tips to Increase Your Profits

June 1, 2003
by Tom McCart Do you want to increase your business? Then get back to the basics and start running your company like it was a true business. Begin by

by Tom McCart

Do you want to increase your business? Then get back to the basics and start running your company like it was a true business. Begin by doing the following:

  • Measure everything
  • Watch your scorecard (Profit & Loss (P&L) statement)
  • Preseason planning
  • Define departmental budgets
  • Set performance standards that complements your business.

I work with contractors all over the U.S. and have found that by implementing some of these very basic business principles, you can simplify your life as an owner. The little things you do in a business will pay big dividends.

Tip 1: Set Annual Service Truck Production Goals

We ask a lot of our technicians and they deserve to know what's expected of them.

Achieving sales goals in many companies is like playing darts blindfolded! There's no way a technician can hit a goal he can't see. If you break down your annual sales using historical trends, sales figures become more accurate. Tell the technician what his production goal is.

For example, break the annual truck goal down to weekly sales figures. I use $160,000 for companies doing less than $2 million in annual sales, $180,000 for companies doing less than $3 million, and $200,000+ for companies exceeding $3 million in sales. The $160,000 figure requires a technician to average $3,100 per week, or $615 per day.

If your technicians run about three service calls per day, the average invoice must be at least $205. Now they can measure themselves.

Tip 2: Measure Everything

If it's worth doing, measure it. Your dispatcher or your dispatching software provides instant sales position. How? Have your technicians collect the following vital information and communicate it back to the dispatcher prior to leaving the service call:

1. Time of arrival

2. Parts used

3. Amount collected

4. Paperwork complete

5. Agreement enrollment

6. Time of departure and ready for next call dispatched.

With this information the dispatcher can track:

  • Sales
  • Average invoice dollars
  • Time on the call
  • Parts needing replenished
  • Agreement sales
  • Paperwork completed.

If a technician is falling behind in his needed invoice average dollar, the dispatcher knows it and can assign additional calls for the day or week to help the technician catch up.

Tip 3: Proper Paperwork

If paperwork is messy, illegible, or incomplete, it's costly for the office support staff (overhead payroll) to correct.

The paperwork is crucial because it's where you collect data for marketing and future business relations.

Tip 4: Don't Ignore Your Cash

The retail end of HVAC is really a pay-on-completion business. Many companies still feel they need to continue billing their customers. If you send out bills, do it every day.

You can’t afford to let customers use your money interest-free. Have your aging report on your desk every Monday morning for review and

Tip 5: Don't Ignore Employees

Coaching, motivating, and managing employees are probably among your toughest challenges. It's imperative for your team to play in harmony with company goals and standards. Problems can and will multiply quickly without good people skills. Morale, performance, production and profit can easily suffer.

Communication is key. Share your company vision with employees; paint a picture of what your company will look like in 10 years. Provide job
descriptions and training.

Post an organizational chart of your company 10 years into the future. Have many empty positions on the chart that become available as your company grows. Paint a career path for future advancement.

Tip 6: If You're Not Busy, Do Something About It

In business, you are normally not busy because you did nothing to get business.

A marketing plan creates attention your company needs to attract customers. Market the uniqueness of your company and its services.

Tip 7: Articulate Value

If you can't explain to your customers why they should do business with you, then why should they?

The "why" is the value you offer that competitors don't. Building value isn't just the salesperson's job. Owners should sit down with their technicians and role-play service value questions and answers.

Tip 8: Employee Training

There are two reasons to fire people. Either you shouldn't have hired them in the first place or you didn't train them properly.

Design and develop a company training and indoctrination program for all new hires. Training should also include cross-discipline teaching. Every employee needs to understand each other's job and how it affects other people.

The key is to train your people so you don't have to “manage" them. Self-managed people will help you run your business most successfully.

Tip 9: Know Your Company Inside and Out

How do you do that? By spending quality time with your P&L statement every month. Check and compare it line item by line item.

Here's one bit of advice — make sure your P&L is set up on a cash accrual basis for a retail business. Also, don't let an accountant monitor the P&L. They're only interested in the tax ramifications of what you do.

Line items in the cost of sales section of a P&L statement that should be checked monthly include:

  • Field labor and field labor overtime
  • Cost of equipment sold
  • Cost of material sold
  • Freight charges.

Going line-by-line in the P&L will help you catch problems. For example, I once audited a company's fuel records during a consulting visit and found that one vehicle, which had a 20-gallon tank, was frequently topped off using 24 gallons of gas. Ninety-nine percent of our technicians are honest, but the 1% can eat you alive.

Know what your gross profit percent is so you can adjust your selling prices to improve. Gross profit dollars must be greater than overhead expenses or you'll be in the proverbial hole.

Regarding prices — be sure you calculate them correctly. I find some contractors still multiply by 1.40 -- thinking they're getting a 40% margin. No! Divide total cost by .60 to get 40%! Profit is a condition of management, not sales.

Tip 10: Build Your Team

You probably started your business to give you more life. So why do we let the business consume our lives?

You must spend some quality time with family and friends outside of work. Sanity needs dictate this. To do it, you need everyone you employ to pull his or her own weight.

Tip 11: Build Your Technicians

We saw this technician shortage coming for 10 years. As an industry, we ignored the signs or didn't believe them. In some areas this shortage is limiting the amount of business that can be done.

Today, many people think that if you want a good technician, you have to hire him or her away from a competitor. I say if you have a service agreement program, you can build your own technicians.

There seems to be plenty of mechanically inclined young adults who work for Wendy's, McDonalds, Burger King, Firestone, and Jiffy Lube. Recruit them. It's not difficult or time-consuming to teach someone how to do maintenance on a system.

Tip 12: Seek Outside Training

There seems to be apathy toward outside training in this industry. I find the same contractors show up to any and all training programs available. The contractors who really need such training, and could benefit the most from it, give every excuse not to attend.

There are several great organizations offering training for contractors, but only if the programs get supported. NATE, ACCA, and PHCC are three national organizations that provide training. Many suppliers and distributors are willing to sponsor training if they could get the enrollment numbers needed to host it.

These 12 tips will help you get back to the basics. And the basics are the foundation upon which your future success will be built. Happy selling.

Tom McCart is an editorial advisory board member of Contracting Business and president of No Secrets, Inc. He is also the industry’s “Million Dollar Salesman,” and has arranged a special price for readers interested in buying a collection of his sales and management manuals in a signed, limited edition.For more info, call 800/963-HVAC (4822) or visit his website at To reach Tom directly, call 239-482-7062 or send him an e-mail at [email protected].