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11 Essential Truths of Contracting

Oct. 10, 2023
Tremendous value lies in everything you the owner can control.

The contracting business is always changing. Efficiencies change. Refrigerants change. The economy changes. And yet, parts of the residential service and replacement side of contracting remain timeless. Here are 11 essential truths of contracting.

1. You Cannot Find Magic Beans

There will always be people in the industry who proclaim they have the magic beans, the bromide, the easy answer. Just trust them. Listen to them. Hang on their every word. They can save you, they say. They can make you wealthy.

In truth, there are no magic beans. There are no easy answers. If it sounds too good to be true, it probably is.

At the same time, do not become too jaded. People do come along with business solutions that will make your life better and easier. Be open to them. Just be careful if they promise too much, ask for too much from you, or tie you into a long term contract.

2. You Cannot Outsource Marketing 

Marketing tends to be a contractor weakness. In the digital age, it seems even more bizarre. Plenty of people will swoop in and promise to make it rain leads if you will only turn your checkbook (or Venmo or Zell) over to them. Maybe they can improve your performance… if you aren’t doing much of anything today. Something is usually better than nothing. 

Marketing is a business’ oxygen. Let them feed you a little O2 if you think they can deliver, but keep your own supply flowing. Always do some, if not most or all of your marketing. Speak with your own voice.

3. You Must Learn Over a Lifetime 

If you do not understand marketing, learn. Take classes. Go to conferences. Attend webinars. Read books. Listen to audiobooks. What holds for marketing, holds for everything else. The day you finished your formal education, your real education began and it is a never ending proposition. 

A contractor who stops learning, stops growing, stops progressing, and sooner or later, just stops to exist as a going concern. You must keep up. This was the truth in the days of Doc Rusk and when John Keeler was teaching “Keeler’s Unique Methods” and it remains true today and will be true tomorrow.

4. You Have No Secrets and Neither Does Anyone Else

Whenever someone claims to have the secret sauce, be very careful. There are no secrets in this business. If there’s a sales or marketing secret, it’s not a good one. When marketing is secret, it means no one knows about it. If no one know about it, it’s probably not very good.

Operational secrets also have a short shelf-life. Technicians and installers move around too much for anything to stay secret for long. Territory managers might keep your competitive advantage secret from your direct competitors, but it is almost too tempting for them to share with other customers who are not competitors.

5. Your Competitive Advantage Comes From Execution and Focus 

Some of the most innovative contractors in HVAC are the most open. They know that the difference is execution and they tend to out-execute everyone else, so why not share? They might learn something in return. 

Become great at applying knowledge, putting it into practice, making mistakes, learning quickly, tweaking, and moving on from the things that do not work. You do not have to be the smartest or most creative, just the best at execution.

6. You Must Hire Above Yourself

No one can be the best at everything. Unless you hire people better than you, you are capping your company’s potential with your own limitations. Hire the best people you can find. Reward them well and they will deliver beyond the investment you make. 

7. You Should Never Be Surprised When People Surprise You

Do not be surprised when the klutz kid you hired as a favor turns out to be a great salesperson. Also, do not be surprised when one of your most trusted joins a competitor or launches his own company across the street. 

People, being people, are human. They are fallible. They have quirks. They have unexpected strengths that even they did not know they had. For good or bad, people will always surprise you. Your team will surprise you. Your suppliers will surprise you. Your customers will surprise you. Be ready to roll with it.

8. Your Most Important Brand is Yours 

The brand on the side of the truck matters more than the brand on the side of the box. After all, the brand on the box is pretty consistent. The contractors who design and install systems vary widely. You do the customer no favors if you persuade him to buy a box brand without persuading him to buy your brand. The best equipment installed poorly sucks. The worst equipment installed well will satisfy.

Moreover, your brand is the only brand that cannot be taking from you. It is the only brand that cannot be given to a competitor. Investing in brands you do not own is like putting money in someone else’s bank account. When it comes time to make a withdrawal, they benefit. You do not. 

9. You Can Thrive As a Local, Neighborhood, Community Business 

As the industry proceeds with another round of consolidation; this one driven by private equity, one thing remains constant. HVAC is a neighborhood business. People want to do business with a neighborhood contractor, a local contractor who is involved in the community, who has a stake in the community, who can be trusted to care about his reputation and the people he serves. 

The emerging private equity behemoths will serve a role, but will never be as nimble or quick as local, privately owned contractors. Even when one of the nation’s largest retailers competed in HVAC, they never were able to generate much more than 2% of the market. People want local service companies they can build a relationship with and whom they can trust. Some will gravitate towards the larger companies. Some will not. The industry is big enough for everyone, which means no one will get left out.

10. Your Customer Base is The Value of Your Company

As a rule, companies are valued financially based on a discounted cash flow of future revenue. Your future revenue is a function of your customer base. The larger it is and the stronger the relationship, the more solid the revenue stream appears. Nothing carries the solidity of service agreement customers or lease agreements tied to service agreements. Build this and build value.

11. You Are Your Best Solution

No one cares about your business as much as you do. No one can solve the problems or oversee their resolution like you can. When there is a problem, you are your best solution. You may need to tap into the expertise of others from time to time, but no one absolves you of responsibility. You are your own best solution. 

Need help with your business? Start with the Service Roundtable. It’s the base level for industry wide contractor support. Learn more at www.ServiceRoundtable.com.

About the Author

Matt Michel | Chief Executive Officer

Matt Michel was a co-founder and CEO of the Service Roundtable (ServiceRoundtable.com). The Service Roundtable is an organization founded to help contractors improve their sales, marketing, operations, and profitability. The Service Nation Alliance is a part of this overall organization. Matt was inducted into the Contracting Business HVAC Hall of Fame in 2015. He is now an author and rancher.