(Article courtesy of ACHRNews.com)
Contractors who have a plan in place are the ones who remain successful
HVAC is a seasonal business. It’s a simple fact of the industry that extreme temperatures in the hotter summer months and colder winter months generate a greater need for heating and cooling. That leaves HVAC contractors with a bit of a predicament in terms of how to bring in revenue during the off-season months. But by having some best practices and sticking to them, it’s possible to be successful all year long.
BUILD A STRONG BASE
Summer and winter months come and go with the busy season, so contractors must build a strong club base of clients to perform maintenance when there are no demand calls, explained Jimmy Hiller, president and CEO of Hiller Plumbing, Heating, Cooling, and Electrical in Nashville, Tennessee.
“During your maintenance visit, your priority is to ensure there will be no potential problems arising in the future that would cause potential breakdowns when the system is pushed to its limits during peak season,” he said. “The goal is to extend the life of the system, then engage the customer on products and services you provide that will make their home more comfortable: IAQ products, duct sealing, humidifiers, dehumidifiers, zone systems, etc.
“Customer retention during the off-season is key for us,” he added. “While we strive to continually stay in front of our existing customers, we ramp up the outreach in an effort to make sure we are servicing them before drastic temperature changes take place. This allows us to keep systems properly maintained and running during those busier times. We are then able to run more new customer calls during those peak seasons, while other companies may still be running tuneup calls for their existing customer base.”
One of the most important factors during the off-season, according to Hiller, is properly staffing for slower periods while maintaining high efficiency in the field.
“Never hire people for anticipated work,” he said. “That work may never come. If you have a large amount of capital and a solid plan on how to generate more business, only hire for the business you have. Your goal must always be to make money with the business you have today. Sure, you want to take care of customers, but a business owner’s job is to make a profit for the effort that he and his team provide.’
Properly managing expenses during this time is also key, and should begin with a five-year plan.
“Break it down to a one-year budget, then drill down by each month,” Hiller advised. “Your budget should itemize all your expenses, including the slow months. Just like we talked about not hiring people you don’t need. Don’t rent office/warehouse space that you don’t need. That also includes trucks, tools, and office personnel.”
According to Wade Hamstra, vice president, Hamstra Heating & Cooling Inc., Tucson, Arizona, they key is to be proactive.
“In southern Arizona, we have beautiful weather six to eight months of the year, so our No. 1 priority as a business the past few years has been to ‘fill the valleys’ by viewing the off-season as our proactive season,” he said. “To have success when the weather is nice, we must be working a proactive plan year-round. The off-season is not the time to take it easy. We must work harder during these months to keep our technicians and installers working and the company growing.”
The way Hamstra does this is by forecasting revenue, billable hours, and monthly call count requirements one year in advance. The company also does the same thing for expense budgets.
“Everyone is working toward that plan months in advance,” Hamstra said. “So right now, our dispatchers are working with our sales teams on filling call capacity for October and November ,and our management teams are reviewing performance metrics and adjusting forecasts and budgets as necessary. It is difficult to do when everyone is busy with summer demand, but we’ve forced ourselves to make proactive planning part of our daily/weekly routines.”
Hamstra also looks at the off-season as a time to improve by investing resources into improvement projects, training, and team building.
“While other companies are laying people off, we are recruiting, training, and building up our teams,” he said. “This takes careful planning from a financial standpoint and requires a little bit of faith, but we have found it to be a crucial strategy for growing our company.”
The best way to generate revenue during the off-season is through maintenance, according to Hamstra. But the company also focuses on providing thorough system diagnostics during summer calls, so techs can make recommendations and follow up on them when the peak season starts to wane.
“We must proactively capture and ‘bank’ off-season opportunities while we have their attention in the heat of summer,” he said.
ADDING COMPLEMENTARY SERVICES
The ideal solution is for contractors to structure their HVAC businesses so that they don’t have much of an off-season, according to Linda Couch, COO, Parish Services, Manassas, Virginia.
“You can add business segments that are complementary but don’t have the same seasonality [e.g., plumbing],” she said. “You might say it won’t keep your HVAC techs busy, but with money coming in, you can afford to do all the things you’re too busy to do in the summer: things like non-urgent maintenance, training, or inventories. And even though people are selling other types of work, some of the work sold might be performed by HVAC techs with minimal cross-training.”
Couch pointed to one of her favorite business stories, which is about a company that built ships designed to break through ice — a very seasonal business.
“At some point, the ice-breaking-ship business slowed, and the company was trying to figure out how to stay viable,” she said. “They thought about the core competencies and how they might leverage those to do something else. They knew steel, and they knew ice … what could they do with that? Well, they started building man-made ski slopes. I think for smaller companies, the biggest challenge is that you want to be able to use the same staff you already have, so you have to think about what they can do. What other work can you have HVAC techs do when the weather is not too hot, not too cold? They know about, for example, indoor air quality and gas work. Things that come to mind immediately are insulation, duct sealing or modification, gas leak searches, gas-piping [e.g., adding a line for an outdoor heater or grill connection], or radon detection and mitigation. Sit back and take an inventory of the skills and aptitudes of the staff, and think about how they might be applied in a new type of work.”
Another tip is for businesses to create structured pricing, Couch added.
“If you’re busy in the summer, you want to flatten the demand curve without losing any money,” she said. “Think like restaurant owners with the hottest dinner spots in town; they offer discounts for reservations before 6 p.m. or after 10 p.m. It’s the same for airlines — we all know a ticket is going to be less expensive if we buy early and stay away from holidays. Have a structured pricing methodology with off-season pricing. For customers who want a replacement but can limp along until fall, we offer upfront discounts for a fall installation and take a non-refundable deposit for the job. Customers like the discount, and they like having time to get together enough money for their purchase. For the company, it means we have work for the installers in the shoulder seasons.”
The seasonality of the industry is the hardest thing in business that contractors must face, according to Butch Welsch, owner of Welsch Heating & Cooling Co. in St. Louis. Welsch considers himself fortunate to be in St. Louis, where there is both a heating and cooling season.
“In December and January, quite frankly, just about anything you do is going to be a waste to try and get business,” Welsch said. “People are worried about the holidays. Now, naturally, if their furnace goes out and they have to have it fixed or replaced, they will. A lot of wives ask for a lot of things, but I don’t know of any wife that asked for a furnace for Christmas or Valentine’s Day. That’s just the nature of the business.”
Welsch doesn’t believe in misleading ads because the 123-year-old company has a reputation to maintain. Instead, the company focuses on creative marketing.
“One of the things we did was partner with Open Door Animal Sanctuary, the largest no-kill shelter in Missouri,” Welsch explained. “We agreed if anybody bought a humidifier from us in November [we did it again during the month of February], we would discount the price of the humidifier and give $10 to Open Door. We ended up giving the shelter a check for almost $1,500. So it was very successful; we sold about 150 humidifiers. It kept our guys busy, and it made us feel good that we were doing something good in the process.”
The company also tried another unique approach this year.
“I have a friend who has an apartment project,” Welsch said. “They’re needing to replace the furnaces and air conditioners, so I gave him two prices: one price if we do it from April through August and the other if we do it September through March. They jumped on the September through March idea. We’re not making the margin we would normally, but we’re doing it at a time when we may not have that much coming in.”
NO SUCH THING
According to Rodney Koop, founder and CEO of The New Flat Rate, the first thing contractors have to realize is that growth during the off-season is over time, not overnight.
“Contractors have to look ahead — way ahead — and it starts by analyzing their assets,” he said. “If I’m going to be busy year-round, I have to have assets and resources that will keep me busy year-round. If I’m in the HVAC business, and HVAC is not a year-round business, then I need to be in a different business during the off-seasons. And there is no such thing as an off-season for business. When the weather goes mild and people are not buying HVAC, they’re buying something. [Contractors] are under the misguided opinion that they’re in the HVAC business when there’s no such thing — you’re either in business, or you’re not in business.”
Koop’s advice to contractors is to get out of the heating and air conditioning business during those slow seasons — determine what customers will buy during that time and get into that business.
“The name of our trade is heating, ventilation, and air conditioning,” said Koop. “If we want to stay within our trade expertise, perhaps we can sell ventilation during that time. Under ventilation comes indoor air quality, duct cleaning, duct sanitizing, and duct system purification.”
There are countless specialties to venture into — attic remolding, water treatment, plumbing, electrical, etc., according to Koop. But what’s most important is for contractors to take stock and analyze their assets.
“You have to take a very hard, very honest look at who you are, what you are willing to do, and what you’re not willing to do,” he said. “You need to know the skills of your employees; maybe you have some who really know refrigeration, so you can offer a special refrigeration tuneup package to market during the slow times to some of the privately held stores or restaurants. I know a contractor who puts in boat docks during the slow time. There’s a lake community near him, and he installs and services boat docks and boat lifts. His company loves doing it. I’d much rather put in boat docks then go around and do a bunch of tune-ups.
“Look at your assets and balance that with the consumer,” he continued. “What will they buy? What could they buy? There is no end to what consumers will buy if you place it in front of them in an appetizing manner.”
Publication date: 9/17/2018