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    Sustaining a Company Culture Outside the Box

    Feb. 6, 2013
    The economics of fixing and replacing boxes (equipment) has been the profit driver of most HVAC contracting companies for decades. And it will continue to be a mainstay for our industry. Equipment replacement is good business, but like McDonalds’ the market is demanding far more from us.
    Rob Falke

    A growing number of highly successful contractors are adding duct renovation and commissioning to most of their residential HVAC equipment replacement jobs.  This added service is paying big dividends to their customers, and at the same time is leading their companies to double digit net profits. Let’s take a look at how the best of them build and sustain the process of system renovation as part of their company culture.

    Equipment Replacement and Burgers
    I saw a McDonald’s Restaurant executive chef on TV a while back promoting a new gourmet salad he had created.  At the end of the interview the host asked if McDonald’s intended to become a purveyor of only healthy foods. The chef sighed and said, “McDonald’s mainstay will always be burgers and fries.”

    The economics of fixing and replacing boxes (equipment) has been the profit driver of most HVAC contracting companies for decades. And it will continue to be a mainstay for our industry. Equipment replacement is good business, but like McDonalds’ the market is demanding far more from us.

    Adding system renovation to your menu will delight your customers and lift you above your competition. Your customers have an appetite for more than just burgers (equipment replacement).  As the cost of equipment (and burgers) has become a commodity you will be handsomely rewarded if you give your customers what they really want. And they want more than just a new box.

    What’s System Renovation?
    The yellow efficiency sticker stuck on the side of new heating or cooling equipment is no guarantee that the customer will actually get that rated efficiency after installation. It only expresses the potential of the equipment under an exacting set of laboratory conditions.

    In order to actually get that efficiency in the field, the equipment must be attached to an electrical system, a refrigerant system, a duct system, and be in a building that matches the specifications published by the manufacturer. System renovation is a series of needed upgrades and adjustments to the related components of the system that assures the equipment can operate as advertized on that yellow sticker. Typical system renovation repairs and adjustments include adding additional duct system capacity, assuring duct tightness, (notice you add pookey only after adding more duct capacity), and upgrading the filter system to reduce the filter’s resistance to airflow. System renovation often includes increasing duct insulation, testing adjusting and balancing the system, as well as adjusting combustion efficiency and refrigerant charge to meet the manufacturer’s specification. The final step is publishing a report to provide the customer evidence that you delivered what you promised.

    Renovating duct systems and then maximizing the performance of those systems at equipment replacement time sounds like a tall order to fill. And it is. But to see this added service clearly, liken it to auto shops having to get their first computer to test, diagnose and repair cars to keep up with the advancements in the auto industry. Welcome to the 21st century.

    How Do We Get Started?
    Just like the auto industry, you’ll have to get the tools and the training to enable your employees to deliver the goods your better customers are looking for. Then you will have to provide the support, systems and incentives needed to upgrade yourself and your employees from laborers to professionals.

    You’ll have to build and put permanently in place the processes and systems that foster a testing, diagnostic and renovation culture. And then just like the car guys, you will find that testing and diagnostics provide new sources of revenue and profit.  You’ll also find that the price verses the cost of these new repairs handsomely rewards you for your investment.

    You’ll need to bring on new inventory and perhaps find new employees that want to do more than replace boxes. You may outgrow employees unwilling or unable to change, or to understand  more is needed than just replacing equipment. Even your marketing must change. New flat rate renovation pricing will be put in place. Your product will become measured operating efficiency that blows your competition out of the water. You’ll no longer be identified by the brand of equipment you sell, but by the results you measure and deliver.  

    The Secret to Sustaining System Renovation
    It’s enjoyable and motivating to upgrade the level of quality and service you deliver to your customers. Remember participating in a new utility program and seeing how your team got all pumped up about doing a better job, only to see their new skills and the artificial customers evaporate the day the rebates and utility marketing went away?

    Companies that excel at and sustain system renovation, find patterns in the repairs that they complete on almost every system. Their testing and sales processes embrace these patterns although each customer feels like their renovation job is customized just for them. They learn that each system renovation is nearly the same from one system to the next and 80% to 90% of what they do in each renovation is pre-packaged.

    Each renovation job is customized by changing 10% to 20% of the work of a system renovation to particular repairs outside the normal scope of work required for a typical renovation. Perhaps a condensate line needs some extra care or a flue needs an overhaul or equipment location should be changed, but these repairs are rare and can be itemized separately by the salesperson.

    Contractors that identify these similarities in each system renovation and build a repeatable renovation process become very successful and sustain and increase their renovation business. Those that try to reinvent system renovation for each job rarely succeed with this new business model, and eventually wear down and fail.

    Renovations don’t have to be perfect, but they need to show a marked improvement in measured operating performance that meets what your customer wants. Renovations are for every customer, not just the tree huggers. Pricing renovation work for a 3 year payback for your customers will delight them and reward you. But keep it realistic.

    Renovation often falls somewhere between the service department and the installation department. As your renovation business grows a new renovation department will usually develop separate from the install or service department.  

    System renovators are specialized individuals that may not need all the skills of the service techs or the installers. Let the install crews replace the equipment, and leave the demo work, duct renovation, duct sealing, insulation and clean up to the renovators.

    Very soon, as your number of renovation jobs grows, you will employ a full time verifier in your company. This person completes the final testing, adjusting, balancing, refrigerant charging and combustion efficiency adjustments after the renovators have completed their work. He or she completes the job, tests out, and publishes the final reports and documentation for your customer.  

    The key is to recognize that system renovation is a new frontier and offers a new level of customer satisfaction and profit that you may be missing today. The ability to sustain this business is to recognize the repeating patters of repairs needed by almost every system, and learn to pre-package your system renovations so each job is not reinventing the renovation process.  

    Rob “Doc” Falke serves the industry as president of National Comfort Institute an HVAC based training company and membership organization. If you're an HVAC contractor or technician interested in a basic NCI HVAC System Renovation Procedure, contact Doc at [email protected] or call him at 800-633-7058. Go to NCI’s website at nationalcomfortinstitute.com for free information, articles and downloads.